Press Release
December 3, 2001
Commenting on the results, David Crossland, Chairman of Airtours plc, said: The year to 30 September 2001 has been
very successful for the Airtours Group and I am very pleased to report that it was not only a year of recovery
but also a year of record profits. There were very strong performances from our market leading businesses in the
UK and Scandinavia and, in North America, TSI improved its underlying profits by 40%. We demonstrated our ability
to turn around underperforming areas of our operations. Progress in Germany has been particularly impressive, with
underlying results improved by 77%, while our North American charter business returned to profitability.
Our financial year ended on an uncertain note for the world economy and for our industry, following the tragic
events of September 11 in the United States. We have commissioned independent research in all of our major European
markets which indicates that the vast majority of our customers will take a holiday next summer. This is supported
by our European load factors for October which have been 92%, only a 1% reduction from last year's levels. However,
we have seen a deferral of booking decisions for summer 2002, and have accordingly taken the short term measures
we consider necessary. We are well placed to respond to this temporary change in customer buying patterns.
This Group has always been managed to ensure that we deliver the maximum return to our shareholders from the vertical
integration of our operations, whilst retaining significant flexibility over our flying and accommodation commitments.
It is in times like these that the benefit of these policies becomes clear and we will continue to adopt a prudent
approach to our capacity management. At this point we have cut capacities in all our markets for all seasons on
sale. We will continue to monitor the situation closely but our inherent flexibility means we are best placed to
adjust capacity quickly according to the development of each market.
Following the successes of last year, I am delighted to formally announce the launch of MyTravel, a new way of
serving our customers and a new name for the Group. MyTravel encompasses all aspects of our distribution business
whether by retail, telephone or electronic media. We will use our other existing businesses, including aviation
and cruises, with their international exposure, to promote the MyTravel name. Our tour operating and accommodation
businesses will retain their strong and well established brand identities and will proudly proclaim that they are
"part of MyTravel Group".
The Airtours name has served us well and will continue to do so as our largest tour operating brand, Airtours Holidays,
but there are enormous benefits from aligning the plc name with our new distribution brand. By adopting that name
we will be able to place it on each of the 115 million brochures we produce each year; on our 51 aircraft and in
the 200 airports they pass through; on each of our 1,000 retail shops and on every single piece of stationery we
use. A resolution to adopt the new name, MyTravel Group plc, will be put before our shareholders at the next Annual
General Meeting and I am sure they will join me in supporting it.
Although the outlook for the leisure travel industry this year is uncertain, and in the light of our record performance,
growth this year will be challenging. But this is a growth industry and with our financial strength and operational
flexibility, the benefits from our efficiency programmes and an exciting new name, we are well placed for future
profitable growth.
GROUP SUMMARY
Group results
Turnover, including our share from Joint Ventures, increased by 15% to £5,089.5m in the year compared with
£4,434.8m last year. The increase of £654.7m comprises £442.1m from continuing operations, £494.6m
from acquisitions made in 2000, and £22.4m from acquisitions made during this financial year, offset by the
reduction in turnover in the businesses reported as discontinued last year of £304.4m.
Operating profit
Operating profit before exceptional items and goodwill and after e-commerce costs increased by 58% to £132.2m,
compared with £83.5m in the prior year. Of the £48.7m improvement, £36.4m is attributable to
continuing operations, £3.6m to acquisitions made in the financial year, and £25.3m to the full year
impact of acquisitions made in 2000. This has been partially offset, however, by the impact of discontinued operations
in 2000 of £16.6m. The results are stated after taking into account the direct costs to the Group and lost
contribution as a result of the 11 September 2001 terrorist attacks in the US, which amounted to £11.4m.
Also included in the results are e-commerce costs of £15.2m (2000: £10.6m). The improvement year on
year in operating profit excluding e-commerce costs and the impact of 11 September was some £64.7m, or 69%.
Interest
Net interest payable in the year declined to £2.4m (2000: £6.7m), resulting in profit before tax, exceptional
items and goodwill of £129.8m (2000: £76.8m). This represents an improvement of £53.0m, or 69%.
Exceptional items
Net exceptional costs in the year were £16.7m (2000: profit of £147.9m). The exceptional costs comprise:
shop closure and reorganisation costs in the UK and Scandinavia of £20.7m and £3.6m respectively; £7.9m
additional costs incurred as part of the fundamental reorganisation of the UK back office operations; £11.2m
of fundamental reorganisation costs in Germany following our acquisition of the remaining shares in September 2000;
and costs associated with terminated operations amounting to £3.9m. These costs have been partially offset
by an exceptional profit on the sale and leaseback of part of our hotel portfolio of £19.9m; net income of
£7.8m as a result of the settlement of a contractual dispute following the termination of an outsourcing
agreement in June 2000; and other profit on sale of fixed assets of £2.9m, largely comprising engine sales.
Goodwill
Goodwill amortisation in the year amounted to £31.8m (2000: £13.3m). The increase year on year largely
reflects the full year impact of TSI, which was acquired in March 2000, together with a full year's charge for
the additional shares in FTi, acquired in September 2000.
Earnings per share and dividends
Basic earnings per share before exceptional items and goodwill increased by 77% to 16.18p compared with 9.12p in
2000. Diluted earnings per share on the same basis was 16.11p, compared with 10.69p in 2000.
The board is recommending a final dividend of 7.50p per ordinary share, which together with the interim dividend
of 2.00p, gives a total dividend for the year of 9.50p, an increase of 5.6% on last year.
SEGMENTAL ANALYSIS
UK - continuing
Turnover from UK continuing operations in the year increased by £348.4m, or 15%, from £2,323.8m to
£2,672.2m, largely reflecting the increased charter tour programmes in summer, particularly at Direct Holidays
and Panorama. Operating profit before exceptional items and goodwill amounted to £92.4m (2000: £97.2m).
The current year figure, however, includes the impact of the 11 September terrorist attacks which resulted in a
cost of £7.4m. E-commerce costs of £8.4m were also incurred in the period (2000: £6.4m) and are
included in the figures above. Excluding both of these items, the underlying improvement year on year in operating
profit was £4.6m.
This improvement reflects the increased size and improved margins of our charter tour operators' summer programmes
together with cost savings following the restructuring activity undertaken. These have been partially offset by
£4.4m of seasonal losses from businesses acquired during last year, in particular a significant number of
hotels in the Globales group which are closed during the winter season.
Net interest receivable in the year amounted to £24.0m (2000: £3.9m), resulting in profit before tax,
exceptional items and goodwill of £116.4m (2000: £101.1m). The increase in interest income largely
reflects the interest received on the proceeds of the sale of our share in Costa Crociere.
Net exceptional profit in the period amounted to £0.2m (2000: £182.7m). In March 2001 we completed
the sale and leaseback of five of our hotels, realising a profit of £19.9m; in addition, during the year
we received £7.8m of income following the termination of an outsourcing agreement and £3.0m from profits
on the sale of other fixed assets.
These profits were offset by £20.7m of costs arising from the closure of 120 of our poorer performing high
street outlets, together with other reorganisations in the UK; £7.9m of further costs incurred in the year
as we completed the relocation of our principal back office operations to an efficient single site in Rochdale;
and £1.9m incurred in the continued downsizing and termination of our Vacation Ownership division.
Goodwill amortisation of £6.0m was charged in the year (2000: £3.9m).
Other Europe - continuing
This segment now contains the results of our Scandinavian Leisure Group, Dutch Leisure Group and FTi, following
the acquisition of the remaining shares in September 2000. To assist in understanding our performance, however,
we have reported FTi's results separately from the rest of the Other Europe segment.
Other Europe - Scandinavia and The Netherlands
Total turnover in the year amounted to £1,018.3m (2000: £926.3m), an increase of 10% or £92.0m
over the prior year. Operating profit before exceptional items and goodwill was £33.9m compared with £10.3m
in the previous year; an increase of £23.6m. The increase is attributable to improved margins in our tour
operations, together with improved efficiency in our Scandinavian airline. The impact of 11 September, which has
been included within operating profit, is £1.2m in the year; e-commerce costs of £5.0m were also incurred
(2000: £3.3m).
Net interest receivable in the year amounted to £1.8m (2000: £10.0m), resulting in a profit before
tax, exceptional items and goodwill of £35.7m (2000: £20.3m).
Net exceptional costs in the year were £3.6m (2000: profit of £1.3m), largely reflecting the closure
costs of 23 shops within our Scandinavian businesses. Goodwill amortisation in the period amounted to £0.9m
(2000: £0.9m).
Other Europe - Fti
Turnover recorded by the Group from our FTi businesses increased in the year to £684.4m (2000: £386.7m,
of which £293.9m was included in Joint Ventures). This increase reflects our increased ownership of FTi,
offset by the reduction in capacity implemented following acquisition of the remaining shares. Operating loss before
exceptional items and goodwill amounted to £25.5m (2000: £44.6m, of which £35.4m was included
within Joint Ventures). The underlying operating result of FTi, when taking account of our 35.92% shareholding
for eleven months of last year, and the income from the distribution businesses disclosed within Associates, has
improved by £75.8m, or 76%. The improvement is a result of the actions taken to refocus the business, rationalise
programmes and improve efficiency. The result also takes account of £0.6m of costs suffered following the
11 September terrorist attacks and £1.0m of e-commerce costs (2000: £0.2m, included within Joint Ventures).
Net interest payable in the year amounted to £9.1m (2000: £3.0m, of which £2.9m was included
within Joint Ventures). The increase largely reflects our increased shareholding year on year. The loss before
tax, exceptional items and goodwill was £34.6m (2000: £47.6m, of which £38.3m was included in
Joint Ventures). Net exceptional costs in the year were £11.3m (2000: £14.3m, of which £11.3m
was included in Joint Ventures). The costs incurred this year largely reflect the reorganisation and rationalisation
of our German operations, where we have fundamentally changed the product offering in line with the needs of the
market and refocused the business on more profitable customer segments. This included the closure of our in-house
airline, FlyFTi, which was announced in May 2001, and a radical reorganisation of the back office and support functions
in place at FTi.
Goodwill amortised in the year amounted to £6.7m (2000: £1.0m).
Other Europe - acquisitions
Gate Eleven and Itaka, which were acquired in the year, contributed £14.0m to turnover and £0.8m to
operating profit before exceptional items and goodwill. This is in line with our expectations on acquisition.
Other Europe - discontinued
The Other Europe - discontinued segment reflects our operations in Belgium and France which were closed down at
the end of the summer 2000 season. Exceptional costs of £2.0m (2000: £19.5m) were incurred in the year
relating to the closure of these operations.
North America - continuing
We have successfully integrated our North American charter operation (NALG) and TSI in line with our plan to drive
out efficiencies. However, in order to assist in a better understanding of the performance of TSI and the turnaround
in NALG, we have reported the two businesses separately this year, for the last time.
North America - NALG
Turnover from our North American Leisure Group increased in the year to £454.5m (2000: £383.8m). Operating
profit before exceptional items and goodwill amounted to £2.4m (2000: loss of £16.3m). The successful
turnaround of this division is largely attributable to the programme rationalisation and cost restructuring undertaken
last year. Also included in the results are £0.9m of costs following the 11 September terrorist attacks.
Net interest payable in the period amounted to £0.4m (2000: interest receivable of £0.4m), resulting
in profit before tax, exceptional items and goodwill of £2.0m (2000: loss of £15.9m). Goodwill amortisation
was £1.4m (2000: £0.8m).
North America - TSI
TSI continues to perform well, contributing £187.3m to turnover during the year (2000: £79.0m); the
increase over the prior year largely reflecting a full year of ownership. Operating profit before exceptional items
and goodwill, but after charging £1.3m as a result of the US attacks and £0.8m of e-commerce costs
(2000: £0.6m) was £21.3m (2000: £18.2m). When the six month period prior to acquisition is included,
this reflects an improvement of some 40% year on year, despite a softening in demand as a result of the uncertainty
in the US economy which has been exacerbated by the terrorist attacks.
Net interest payable amounted to £18.6m (2000: £10.1m), the increase largely reflecting the full year
of ownership. Profit before tax, exceptional items and goodwill was £2.7m (2000: £8.1m). Goodwill amortisation
amounted to £14.1m (2000: £6.7m).
North America - acquisitions
Our North American acquisitions in the year, consisting of distribution businesses in Canada, and WorldChoiceTravel.com,
Inc., DriveAway Holidays Pty Limited and Kemwel in the US, are currently being integrated into our existing operations
and are performing in line with expectations. During the year they contributed £8.4m to turnover and £1.0m
to operating profit before exceptional items and goodwill. Goodwill amortisation was £1.0m.
Joint Ventures and Associates
Following the disposal of our interest in Costa Crociere and the acquisition of the remaining shares in FTi in
September 2000, Joint Ventures and Associates now consist of Tenerife Sol, Hotetur, our MyTravel credit card joint
venture and certain distribution businesses in FTi, together with our newly acquired associate, Aqua Sol. In order
to assist in understanding, the comparative figures for 2000 stated below are after excluding Costa Crociere and
the results of FTi included in Joint Ventures last year.
During the period Joint Ventures and Associates contributed £5.9m to operating profit before exceptional
items and goodwill (2000: £2.1m). Goodwill amortisation was £1.7m (2000: £nil).
BUSINESS DEVELOPMENTS
This year has been a year of consolidation and reorganisation within the Airtours Group, rather than one of significant
investment. We have, however, invested a total of £63.1m in the acquisition of new businesses.
During the year we acquired several small retail businesses in North America in line with our strategy of securing
distribution for our tour operators in Canada. The total consideration for these retail acquisitions is £23.7m.
In March 2001 we acquired for £3.1m WorldChoiceTravel.com, Inc., which even in the current climate is taking
more than double the number of bookings it was last year. WCT is a fast growing travel services business providing
information and booking technology to enable consumers to make hotel reservations worldwide through the internet.
On 23 July 2001 we acquired for £1.0m DriveAway Holidays Pty Limited, Australia's leading provider of car
rental and car leasing services to the outbound leisure travel market; and on 6 August 2001 we acquired for £4.9m
the Kemwel car rental and leasing brand in North America. Both of these acquisitions complement our AutoEurope
operations within TSI's portfolio of specialist leisure travel businesses. AutoEurope has also recently announced
the start up of operations in the UK. AutoEurope UK will offer car hire to travel agents and consumers, leveraging
off its operations and cost base in the US.
Within our Other European operations we acquired, in November 2000, Gate Eleven, a scheduled-based Danish tour
operator carrying approximately 40,000 passengers a year. This acquisition, together with the expansion of our
scheduled operations in The Netherlands, strengthens our position in this important segment of the market. On 4
July 2001 we also acquired Itaka, a tour operator in Poland carrying approximately 60,000 passengers. We are currently
integrating our existing operations in Poland into Itaka to drive out synergies in the future. The total consideration
for both acquisitions amounted to £2.9m.
On 29 March 2001 we announced the sale and leaseback, for a 15 year period, of seven of our Spanish hotels, two
of which are operated by our joint venture, Hotetur. This resulted in an exceptional profit for the Group of £19.9m
and released cash in the Group of £44.5m for investment elsewhere. On 7 June 2001 we entered into a strategic
alliance and acquired, for a total consideration of £27.2m, a 19.99% stake in Aqua Sol, a leading hotel group
in the Eastern Mediterranean which is quoted on the Cyprus Stock Exchange. On 18 September 2001 we also sold the
Bellevue hotel to Hotetur, releasing £19.6m of cash in the period, with a further release of £18.6m
in November 2001. These transactions strengthen our hotel partnerships, ensuring that we retain long-term access
to quality accommodation both in the Eastern and Western Mediterranean.
CASH BALANCES AND CASH FLOW
Cash and deposits at 30 September 2001 were £378.6m compared with £793.3m last year end. Cash balances
reduced due to the repayment of debt totalling some £302.1m, including £25.0m of our Convertible Bonds.
Excluding these flows, the major cash inflows in the Group during the year included £64.0m from sale and
leaseback transactions; £19.6m from the sale of the Bellevue hotel complex to Hotetur; and £66.5m of
debt raised in the US Private Placement market. Cash outflows in the period mainly comprised £60.1m on the
acquisition of new businesses; £126.2m on the purchase of fixed assets; and £45.1m for equity dividends.
The working capital outflow in the period of £151.0m relates largely to the effects of the structural changes
we made to our business last year, principally, the closure of our operations in Belgium and France and the significant
downsizing of FTi.
CAPITAL INVESTMENT
During the year, the Group invested £128.1m in capital expenditure compared with £224.1m in 2000. The
main components of the expenditure were £33.6m on aircraft and aircraft spares; £45.3m on computer
systems and equipment; and £27.8m on land and buildings, mainly relating to the refurbishment of hotels and
shops.
OUTLOOK
The outlook for the leisure travel industry this year is uncertain, and in the light of our record performance,
growth this year will be challenging, although load factors since 11 September show that our customers remain keen
to travel.
Bookings and Load Factors
Our load factors in Europe in October were 92%, only 1% below last year, and independent research we have carried
out in our major European markets supports our view that the majority of our customers will take a holiday next
summer, even though many have deferred the decision to book. This pattern is reflected in our current booking levels
for each season.
Overall, charter bookings for winter 2001/02 are at 85% of last year's level and charter bookings for summer 2002
are at 83%. Capacity for winter 2001/02 is at 85% of the prior year level while capacity for summer 2002 is at
86%. Selling prices for both winter 2001/02 and for summer 2002 are 1% ahead.
Bookings in our UK charter businesses are at 93% of last year's level for winter 2001/02 and 88% for summer 2002.
Capacity for winter 2001/02 is at 85% of last year, while for summer 2002 it has been cut to 87%. Average selling
prices are at 98% of last year's level for winter 2001/02 and 99% for summer 2002.
In Scandinavia and Holland, bookings for winter 2001/02 are at 83% of last year's position with capacity at 83%
of last year. Bookings for summer 2002 are currently at 52% reflecting the relatively recent launch of the summer
brochures for which capacity stands at 85% of the prior year. Average selling prices are 6% ahead for winter 2001/02
and 8% ahead for summer 2002.
In Germany, bookings are at 29% of prior year mainly as a result of the reduced programme on sale for winter 2001/02.
Brochures for summer 2002 will not go on sale until December. Average selling prices for winter 2001/02 are 30%
ahead of the prior year.
Our North American charter businesses are reporting bookings at 66% of prior year for winter 2001/02 with capacity
at 92%. These businesses have not recovered as quickly as those in our other markets following 11 September. However,
since the recent restructuring in this market after the demise of Canada 3000, bookings have been running considerably
ahead of last year. Again, brochures for summer 2002 will not be on sale until February. Average selling prices
for winter 2001/02 are 2% ahead of the prior year.
Bookings in our market leading leisure travel business in the USA, in particular cruise distribution and AutoEurope,
have recovered strongly in recent weeks. Bookings in cruise distribution are currently some 150% of last year's
level and bookings at AutoEurope are at 78% of last year's level.
The inbound US market is particularly important to our German modular operation within FTi and whilst we expect
its trading to continue to improve, the current disruption in this market is likely to delay FTi's return to profitability.
Since 11 September we have taken prudent measures in relation to both capacity on sale in our major markets and
the cost base of the business.
Operational flexibility
At Airtours we have always deliberately structured ourselves such that we retain significant operational flexibility.
In respect of summer 2002, our third party flying programmes have yet to be finalised and few hotel deposits have
been paid. Our business model ensures that we have the inherent flexibility to deal with capacity reductions. The
deliberate undersizing of our aircraft fleet compared with our total tour operating passengers and the even smaller
proportion of our passengers staying in our own accommodation, or in hotels to which we are fully committed, ensures
that we can reduce capacity in response to market conditions without significant exposure to the costs of under-utilised
assets. We have cut winter capacity by 15% and reduced capacity for summer 2002 by 14% but we retain the ability
to adjust capacity as circumstances require.
Financial strength
The Group has substantial cash resources, bank facilities and committed bonding facilities. These resources provide
the financial strength needed to support the business in the future.
Cost reduction
In addition to our immediate actions to reduce capacity for future seasons we have reduced discretionary expenditure.
This includes non-essential capital expenditure, which has been curtailed. We have also had to make some difficult
decisions regarding redundancies throughout the Group. These have now been implemented and resulted in a reduction
in our workforce of 1,600. This is in addition to the 1,200 positions that have been removed during last year as
a result of the efficiency programmes and reorganisations implemented prior to 11 September.
MYTRAVEL
We are today unveiling our plans for the future of the Group under the new name, MyTravel Group plc. These plans
were obviously underway before the events of 11 September and we have thought very carefully before continuing
with them in the current environment. However, we are convinced that this is the right way forward for the Group
and can be achieved by diverting existing expenditure, with no net incremental cost.
MyTravel is a whole new way of buying, selling and delivering leisure travel, where establishing and maintaining
a relationship with each of our 15 million customers worldwide is at the heart of everything we do. Through extensive
customer research and adaptation of other successful high street retail models, we have developed a completely
new experience for our retail shop customers. Across the UK, all our stores will be transformed under the MyTravel
name to create a more interesting and exciting retail environment for our customers to buy their holidays. In Scandinavia,
a new, innovative customer proposition will see MyTravel offering the first retail environment where a range of
our tour operator brands will be available under one roof.
Through investment in leading edge technology, we have launched today, and are further developing, a multi-channel
distribution capability with MyTravel.com in the UK, Scandinavia and America. On the UK site alone we have over
15,000 images, 2,500 editorial articles and 300 virtual tours.
By re-branding our successful Airtours International and Premiair fleets as MyTravel Airways, we will create a
single European fleet of 51 aircraft that will fly our new name to numerous destinations worldwide. The full transition
to the MyTravel livery will be phased in as our new aircraft rollover is completed. This will ensure that MyTravel
will be seen not only by millions of our own passengers flying to worldwide destinations, but also by the many
millions of other international travellers using airports around the world.
In launching the MyTravel brand across the Group, we are promoting one of the world's largest leisure travel businesses
with operations touching the four corners of the world. We have some of the strongest brands in travel, many of
which have become household names, backed up with the best team in the industry. Going forward, our customers will
be at the heart of everything we do and we will provide a personalised, accessible and quality service within an
environment that spans every aspect of travel. The financial benefits of higher customer loyalty and retention
are considerable to our Group with its 15 million customers.
Statement from Airtours PLC for immediate release
"To clarify media reports running today, we can confirm that the Group is not planning to make any new redundancies.
"The redundancy figures quoted in our preliminary results today were historical figures which stated that
last year 1,200 worldwide redundancies had been made as part of a reorganization programme. A further 1,600 job
cuts were also announced following September 11. "On October 8, 2001, Airtours' Chief Executive, Tim Byrne
estimated the post September 11 redundancy worldwide figure to be 2,000, but the actual figure as released today
was 1,600, with only 200 redundancies in the UK. Since this time, no new redundancies have been announced."
(from an Airtours Spokesperson)
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Produced for Airtours plc
Contact:
Airtours plc: until 29/11/01 Tel: +44 20 7404 5959
Thereafter Tel: +44 161 232 65 23
David Crossland Chairman
Tim Byrne Chief Executive
David Jardine Finance Director
Brunswick
Fiona Antcliffe
Gavin Partington
Tel: +44 20 7404 5959