Final Results
Holidaybreak PLC
04 December 2003
For Immediate Release 4 December 2003
HOLIDAYBREAK PLC
ANNOUNCES PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2003
Holidaybreak plc ("HBR"), the provider of specialist holidays, today announces
its preliminary results for the year ended 30 September 2003.
HIGHLIGHTS
• Robust performance in 2003 - well placed for opportunities ahead
• 10% dividend increase to 22p for the year
• Strong start to 2004 by Hotel Breaks and Adventure
Financial
• Turnover £260m - up 19%
• Operating Profit1 £31.8m - up 9%
• Statutory Profit Before Tax £20.7m (2002 : £24.0m)
• Headline EPS2 44.4p - up 4.5%
• Basic EPS 31.5p (2002: 36.5p)
Camping Division:
• Sales 18% higher at £128.4m. Operating profit3 stable at £18.9m
(2002 : £19m)
• Held back by the Iraq war with strong recovery post Easter
• Eurosites, acquired in September 2002, now fully integrated leading
to £1.6m annual cost savings
• Bookings after Christmas expected to mitigate slow start to current
year where year on year sales are down 20%
Hotel Breaks:
• Sales up 27% at £97.8m. Operating profit3 up 41% to £11m, improved
margins
• Trend toward shorter holidays and renewed interest in UK boosts
performance
• Very strong internet growth - travel agency and direct sales also
showed healthy increase
• Successful European product extended with launch of new Beach Breaks
programme
• 2004 Sales currently 37% up
Adventure Holidays:
• Sales up 2.1% at £33.3m. Operating profit3 at £1.9m down from £2.4m
in 2002
• Increase in sales despite Iraq war, terrorist incidents, regional
conflicts and SARS
• 2004 Sales currently up 8% with strong recent bookings. Cautious
optimism tempered by geopolitical awareness.
1 Before goodwill, amortisation and impairment (£3.4m) and exceptional costs
(£3.1m)
2 Before amortisation and impairment of goodwill (£3.4m), exceptional costs
(£3.1m), amount written off fixed asset investments (£0.6m) and tax
3 Divisional operating profit stated before goodwill and exceptional costs
Commenting on the results, Bob Ayling, Chairman of Holidaybreak, said:
"We have once again increased our headline earnings per share and the dividend
and look forward to further progress in 2004. Supported by the strong cash
generating characteristics of the Group, we believe that we are well placed to
meet the challenges ahead and that longer term prospects remain excellent."
For further information, please contact:
Richard Atkinson, CEO On 04.12.03: 020 7466 5000
Holidaybreak 01606 787100
Tim Anderson / Isabel Petre
Buchanan Communications 020 7466 5000
HOLIDAYBREAK PLC - PRELIMINARY RESULTS 2003
CHAIRMAN'S STATEMENT
Holidaybreak has once again demonstrated the resilience of its businesses with
an overall robust performance, an increase in headline profits and earnings per
share, and a reduction in borrowings through the generation of £9m of net cash.
This is a satisfactory performance, given the difficult trading conditions
encountered by UK overseas holiday operators this year. We believe that the
business is well placed for the opportunities ahead.
In the year to 30 September 2003, profits before charging goodwill, exceptional
items and tax, increased by 2.9% to £27.9m on turnover of £259.5m. There were
exceptional and other non-recurring costs of £3.7m mainly relating to the
Eurosites acquisition. Headline earnings per share rose 4.5% to 44.4p and the
proposed final dividend will result in an overall annual dividend of 22.0p (up
10%).
DIVIDEND
The Board is recommending a final dividend of 16.0p, payable on 21 April 2004,
to shareholders on the register on 26 March 2004, making a total of 22.0p for
the year.
THE DIVISIONS
Camping Division
In common with most UK overseas summer holiday businesses, Camping faced very
weak early markets which never achieved a sustained recovery. UK bookings
started slowly with families apparently unwilling to make early commitments to
summer holidays. Demand in the key post New Year period slowed further as the
Iraq war loomed. Post Easter we saw a strong recovery that allowed us to make up
some of the lost ground. Bookings from our two main European markets, Holland
and Germany, held up well, in the context of economic slowdown and weaker
consumer sentiment. With like for like sales down 6% and capacity reduced by 4%
there was an adverse impact on occupancy rates and gross margins.
Operational improvements and exceptionally good weather in northern and western
France helped us achieve higher customer satisfaction levels than in recent
years. The hot summer in the UK may have deterred some late bookings but was not
overall a significant factor.
The Camping Division management team had the additional challenge of integrating
the Eurosites business following its acquisition for £29.9m in September 2002
from MyTravel Group plc. This was completed successfully by the end of the year.
The £1.6m annual cost savings achieved were better than our original estimate.
However, Eurosites' bookings performance fell short of target, reflecting the
general market weakness and holding back overall profitability.
Hotel Breaks Division
With shorter holidays in vogue and the renewed interest in the UK as a holiday
choice, the Hotel Breaks Division once again prospered. Its outstanding year on
year growth record continued. Sales were up by 27% and margins again improved.
We were also helped by the ready availability of good quality hotel
accommodation at attractive rates. All our main distribution channels - high
street agents, direct mail and internet - delivered strong year on year growth.
The acquisition for £2m of Bridge Britain and Ireland and London Travel Service
from MyTravel Group plc in March 2003 gave travel agent and direct sales an
additional boost in the second half. In its second year, the European programme
sold strongly through high street travel agents, more than doubling its sales to
9% of divisional turnover.
Adventure Holidays Division
In difficult circumstances, Adventure Holidays produced a resilient performance
although one which ultimately fell short of our original expectations.
Geopolitical events proved even more disruptive than in the period following
September 11th. As well as the high profile impact of the Iraq war and SARS,
the business was held back by various terrorist incidents, regional conflicts
and destinations subject to adverse Foreign Office travel advice. Areas not
directly affected by these events, such as Europe, South America and South
Africa, performed well demonstrating again the continuing appeal of 'soft
adventure' travel. Our management team worked hard to maintain tour load
factors and gross margins at normal levels and to achieve a creditable result in
difficult circumstances.
CURRENT TRADING AND PROSPECTS
It is too early in the 2004 campaign to form anything but a preliminary view of
prospects for our three divisions although both our year round businesses, Hotel
Breaks and Adventure, have made an encouraging start to 2004.
Hotel Breaks 2004 sales are currently 37% higher year on year. Demand for UK
short breaks continues to be strong and the supply side situation remains
favourable. We continue to benefit from additional distribution generated from
the acquisition, referred to above, and we expect overseas holiday sales to be
boosted by the recent launch of a new European Beach Breaks programme.
Revenues for 2004 Adventure Holiday sales to date are 8% up on 2003. Bookings
have come in strongly since the current marketing campaign was launched. Whilst
the geopolitical environment remains fragile, we are cautiously optimistic that
this will be a better year for Adventure.
Assessing the performance of the Camping Division to date, in the context of a
very weak early market for summer 2004 overseas holidays, is more difficult as
we have recently implemented the second phase of our Eurosites post acquisition
plan. The Eurosites brand and capacity have now been fully integrated into
Eurocamp and Keycamp and, due to the elimination of unprofitable camp-sites and
surplus low value tent product, combined capacity for 2004 is expected to be 8%
lower than in 2003. Against the background of a mainstream package holiday
market which is reported to be as much as 30% down and unfavourable timing in
comparing marketing campaigns, our year on year Camping sales for 2004 are
showing a deficit of 20%. We expect post Christmas bookings to be much
stronger than in the equivalent war build up period.
STRATEGY
The travel industry continues to undergo significant change as demand for travel
products responds to lifestyle changes, low-cost airlines and marketing
opportunities created by technology. Travel consumers are more knowledgeable,
want flexibility and more varied holiday experiences but demand value and
quality products. Holidaybreak's specialist holiday businesses are well placed
to benefit from these trends and will do so through active development of
products and distribution channels and close attention to the cost base. Steady
organic growth is our primary aim and this will be supported with appropriate
acquisitions at the right value.
BOARD CHANGES
I joined the Board as a non-executive director on 1 February 2003 and succeeded
Angus Crichton-Miller as Chairman on 1 June 2003, following the expiry of his
second three year term. Holidaybreak grew and prospered during Angus's period
as Chairman, during which he demonstrated great skill and leadership of the
highest quality. We aspire to do as well in the years ahead.
On 12th November 2003, we announced that Jim Crew, who is Managing Director of
our Camping Division, would be retiring from the business in 2004 once a
suitable successor is appointed. He will then be available to ensure a smooth
transition and handover. I thank Jim for his outstanding contribution to
Holidaybreak since he first joined the company in 1989. We wish him well for the
future.
EMPLOYEES
Since becoming Chairman of Holidaybreak I have been able to meet many of the
company's employees both in the UK and overseas. I have been very impressed by
the commitment, enthusiasm and skill which they show in doing their various
jobs. They will be instrumental in the continuing success of the business. I
would like to thank all Holidaybreak employees for their vital contributions in
2003.
IN CONCLUSION
2003 has not been an easy year for the travel industry or for Holidaybreak.
However, we have once again increased our headline earnings per share and the
dividend and look forward to further progress in 2004. Supported by the strong
cash generating characteristics of the Group, we believe that we are well placed
to meet the challenges ahead and that longer term prospects remain excellent.
Robert Ayling
Chairman
HOLIDAYBREAK PLC - ANNUAL REPORT 2003
FINANCE DIRECTOR'S REVIEW
In the year to 30 September 2003, Holidaybreak plc increased headline earnings
per share by 4.5% to 44.4p and reduced net debt by £9.0m to £23.4m as we
continued to benefit from the strong operational cash flows in all our
businesses. Our strong cash flow capabilities will enable the Group to rebuild
interest cover and pay down debt over the coming year.
GROUP PROFIT AND LOSS ACCOUNT
Turnover in 2003 was up 19% on 2002 at £259.5m (2002: £218.7m). Operating profit
before exceptional costs and amortisation and impairment of goodwill increased
by 9% to £31.8m (2002: £29.2m). Headline earnings per share, stated before
exceptional operating costs, amounts written off fixed asset investments and
amortisation and impairment of goodwill, were 44.4p per share, an increase of
4.5 % over 2002 (42.5p).
The acquisition of Eurosites, for £29.9m in cash, at the end of the previous
financial year resulted in the net interest charge increasing from £2.1m in 2002
to £3.9m. Interest cover reduced from 12.3 times in 2002 to 6.5 times in 2003.
The Group's tax charge including full provision for deferred tax, was £6.1m
(2002 £7.1m), and the tax rate (29.5%) was marginally lower than 2002 (29.6%).
The proposed final dividend of 16.0p per ordinary share represents an increase
of 13% over 2002 and gives a total dividend for the year of 22.0p per ordinary
share (2002: 20.0p). Dividend cover is 2.0 times and we continue to maintain our
progressive dividend policy.
DIVISIONAL RESULTS
Camping Division sales were higher by 18% to £128.4m (2002: £109.2m), including
those generated by the acquisition of Eurosites. Operating profits were £18.9m
(2002: £19.0m).
Hotel Breaks sales were up 27.1% at £97.8m (2002: £76.9m). Operating profits
increased by 41% to £11.0m (2002: £7.8m).
Adventure Division sales at £33.3m were 2.1% up on 2002 (£32.6m). Operating
profit was £1.9m (£2.4m).
EXCEPTIONAL OPERATING COSTS AND OTHER NON-RECURRING COSTS
During the year, the Group suffered exceptional operating costs of £3.1m. Of
these the principal component (£2.7m) was re-organisation costs following the
acquisition of Eurosites. We also incurred costs of £401,000 in respect of
professional advisers' fees relating to acquisitions ultimately aborted.
In addition, we have written down by £600,000 the value of a fixed asset
investment - redeemable preference shares in a printing business acquired as
part of the Baldwin acquisition in 1998.
ACQUISITIONS
During the year our Hotel Breaks Division acquired the Bridge Britain and
Ireland and London Travel Service programmes from MyTravel Group plc, for a cash
consideration of £2.0m.
BALANCE SHEET
Net assets of the Group increased to £38.3m (2002 (restated): £33.5m). Net debt
gearing at 30 September 2003 was 61.0% compared to 96.7% at the previous year
end.
Goodwill previously written off to reserves did not take account of certain
amounts due which were waived at the time of acquisition. It has been
recalculated, resulting in a reduction of the profit and loss account reserve at
1 October 2001 of £3.6m and an increase in creditors due within one year of the
same amount.
Investments of £3.1m (2002: £3.2m) are shares in the Company purchased by the
wholly owned subsidiary, Holidaybreak Trustee Limited, in respect of the
Company's various share option and share award schemes.
CAPITAL EXPENDITURE
Net capital expenditure in the year to 30 September 2003 was £21.5m (2002:
£15.1m). The majority of this was again accounted for by the Camping Division,
which spent a total of £20.5m of which £16.1m was on mobile-homes. The number of
units due for replacement will reduce in 2004 and hence we expect a reduced
level of capital expenditure in the year ending 30 September 2004.
The Group's depreciation policy is to write down the cost of mobile homes to an
estimated residual value over their projected economic life, usually six
seasons. Disposal proceeds in respect of mobile homes sold at the end of their
useful life were £4.3m. Overall sales achieved net book value.
In order to extend the economic life, we are sourcing units of higher
specification from European manufacturers and introducing a refurbishment
programme for existing units.
CASH FLOW
The Group's net borrowings at 30 September 2003 were £23.4m, compared with
£32.4m in 2002. Cash flow from our operating activities was £47.4m, which
represents another strong performance.
Available bank facilities are now £114.2m and are sufficient to meet the working
capital, investment and bonding requirements of the Group. In addition to these
facilities we entered into hire purchase agreements with various UK financial
institutions to finance the purchase of mobile-homes. Approximately 57% of the
annual expenditure on mobile homes was financed from this source in 2003.
FOREIGN CURRENCY AND INTEREST RATE RISK MANAGEMENT
The Group's transactional foreign currency exposures arise from the sales of
holidays in overseas markets and the costs of operating overseas, particularly
accommodation and travel. Currency revenues, principally Euros and US Dollars,
represent approximately 20% of total Group revenues. Currency outflows account
for 32% of all Group costs. The Group's policy is to hedge anticipated currency
exposures and we have entered into forward contracts in respect of our expected
trading cash flows for the next twelve months.
The Group's exposure to interest rate fluctuations on its borrowings is managed
by using interest rate swaps. At 30 September 2003, the proportion of the
Group's gross borrowings at fixed and capped rates was 68% and the average rate
was 5.91%. All cash balances on deposit were at floating rates.
Robert Baddeley
Finance Director
Holidaybreak plc - Consolidated profit and loss account
Year ended 30 September 2003
2003 2002
£'000 £'000
Turnover 259,514 218,748
Cost of sales (189,792) (156,123)
Gross profit 69,722 62,625
Operating expenses (44,513) (36,471)
Operating profit before goodwill amortisation and impairment and exceptional 31,780 29,182
costs
Goodwill amortisation (2,615) (1,683)
Goodwill impairment (827) (1,345)
Exceptional costs (3,129) -
Operating profit 25,209 26,154
Investment income 744 443
Amounts written off fixed asset investments (600) -
Interest payable and similar charges (4,632) (2,566)
Profit on ordinary activities before taxation 20,721 24,031
Tax on profit on ordinary activities (6,112) (7,120)
Profit on ordinary activities after taxation 14,609 16,911
Dividends paid and proposed (10,325) (9,295)
Retained profit for the year 4,284 7,616
Earnings per ordinary share
Headline earnings per ordinary share 44.4p 42.5p
Basic earnings per ordinary share 31.5p 36.5p
Diluted headline earnings per ordinary share 43.9p 41.5p
Diluted basic earnings per ordinary share 31.2p 35.7p
Holidaybreak plc - Consolidated statement of total recognised gains and losses
Year ended 30 September 2003
2003 2002
£'000 £'000
Profit for the financial year 14,609 16,911
(Loss) gain on foreign currency translation (200) 14
Total gains and losses recognised relating to the year 14,409 16,925
Prior year adjustment (as explained in note 5) (3,600)
Total gains and losses recognised since last annual report and financial 10,809
statements
Holidaybreak plc - Consolidated balance sheet
30 September 2003
2003 2002
Restated
(see note 5)
£'000 £'000
Fixed assets
Intangible assets 44,238 45,396
Tangible assets 71,994 72,034
Investments 3,073 3,191
119,305 120,621
Current assets
Assets held for disposal 3,750 2,365
Debtors 21,977 15,462
Cash at bank and in hand 33,791 34,354
59,518 52,181
Creditors: amounts falling due within one year (95,479) (79,046)
Net current liabilities (35,961) (26,865)
Total assets less current liabilities 83,334 93,756
Creditors: amounts falling due after more than one year (40,443) (54,299)
Provisions for liabilities and charges (4,621) (5,962)
Net assets 38,280 33,495
Capital and reserves
Called-up share capital 2,368 2,350
Share premium account 33,435 31,911
Other reserves 87 87
Profit and loss account 2,390 (853)
Equity shareholders' funds 38,280 33,495
Holidaybreak plc - Consolidated cash flow statement
Year ended 30 September 2003
2003 2002
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 47,373 54,018
Returns on investments and servicing of finance
Interest and other investment income received 865 560
Interest paid (3,549) (1,626)
Interest element of hire purchase payments (1,043) (1,151)
(3,727) (2,217)
Taxation
UK corporation tax paid (4,871) (5,888)
Overseas tax paid (1,157) (1,145)
(6,028) (7,033)
Capital expenditure
Purchase of own shares (482) (695)
Payments to acquire tangible fixed assets (9,160) (9,201)
Receipts from sale of tangible fixed assets 4,343 2,021
(5,299) (7,875)
Acquisitions and disposals
Purchase of businesses and subsidiary (2,284) (31,032)
undertakings (net of cash acquired)
(2,284) (31,032)
Equity dividends paid (9,374) (8,501)
Cash inflow (outflow) before financing 20,661 (2,640)
Financing
Issue of ordinary share capital 701 1,471
New loans 3,448 27,945
Repayment of borrowings (18,312) (6,000)
Capital element of hire purchase payments (6,983) (6,727)
(21,146) 16,689
(Decrease) increase in cash in the year (485) 14,049
NOTES
1. Segment information
2003 2002
£'000 £'000
Group turnover by geographical origin was as follows:
United Kingdom 208,249 176,692
Ireland 8,460 8,023
Netherlands and Belgium 21,722 16,012
Germany, Switzerland and Austria 17,108 14,191
Others 3,975 3,830
259,514 218,748
Group turnover and operating profit before goodwill amortisation and impairment
and exceptional costs by class of business was as follows:
Operating profit before
goodwill amortisation and
impairment and
Turnover exceptional costs
2003 2002 2003 2002
£'000 £'000 £'000 £'000
Camping holidays 128,428 109,194 18,858 18,963
Hotel breaks 97,776 76,941 11,011 7,805
Adventure holidays 33,310 32,613 1,911 2,414
259,514 218,748 31,780 29,182
2. Dividends paid and proposed on equity dividends
2003 2002
£'000 £'000
Under provision in respect of final dividend 5 43
Interim dividend paid of 6.0p per ordinary share (2002 - 5.9p) 2,833 2,768
Final dividend proposed of 16.0p per ordinary share (2002 - 14.1p) 7,578 6,627
Dividends paid and proposed in respect of investment in own shares (91) (143)
10,325 9,295
If approved by shareholders, the proposed final ordinary dividend will be paid
on 21 April 2004 to those ordinary shareholders on the register on 26 March 2004
and will absorb £7,578,881.
3. Reconciliation of operating profit to operating cash flow
2003 2002
£'000 £'000
Operating profit 25,209 26,154
Depreciation charges and amortisation and impairment of goodwill 19,034 16,198
Increase in debtors (6,515) (1,609)
Increase in creditors 9,645 13,275
Net cash inflow from operating activities 47,373 54,018
4. Reconciliation of net debt
2003 2002
£'000 £'000
(Decrease) increase in cash in the year (485) 14,049
Cash outflow (inflow) from decrease (increase) in debt and lease financing 21,847 (15,218)
Change in net debt resulting from cash flows 21,362 (1,169)
New hire purchase contracts (12,320) (6,161)
Net debt at beginning of year (32,395) (25,065)
Net debt at end of year (23,353) (32,395)
5. Adjustments to prior year balance sheets
Adjustments relating to the following matters have been made to the balance
sheets at 30 September 2001 and 2002:
1) Loans amounting to £27,500,000, which had been repaid close to the year
end, were incorrectly included in long term loans and cash in hand in the Group
balance sheet.
2) Goodwill previously written off to reserves did not take account of
certain amounts due, which were waived at the time of acquisition. It has been
recalculated and as a consequence the figure for accruals and deferred income
has been increased by £3,600,000 and the consolidated profit and loss reserve
reduced by the same amount in the Group balance sheet at 30 September 2001.
Neither of these adjustments has resulted in a restatement of profit for the
year in either 2001 or 2002. The impact on the respective balance sheet is set
out in the following table:
Accruals and Bank loan
Cash at deferred Net current falling due Equity
bank and income assets after more Profit and shareholders'
in hand (liabilities) than one year loss account funds
Group £'000 £'000 £'000 £'000 £'000 £'000
2002 as previously 61,854 (17,244) 4,235 (61,375) 2,747 37,095
stated
Reclassification and (27,500) - (27,500) 27,500 - -
offset of loans at
30 September 2002
Recalculation of - (3,600) (3,600) - (3,600) (3,600)
goodwill written off
to reserves at 1
October 2001
2002 restated 34,354 (20,844) (26,865) (33,875) (853) 33,495
6. Non-statutory accounts
The results set out in this announcement are non-statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The results for the year
ended 30 September 2003 are extracts from the 2003 Group statutory accounts
which, if adopted by the members in General Meeting on 10 February 2004 will be
filed with the Registrar of Companies. These have been audited and reported upon
without qualification.
The results for the year ended 30 September 2002 are extracts from the 2002
Group statutory accounts, as filed with the Registrar of Companies. The auditors
have reported on these accounts; their report was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
The preliminary announcement has been prepared in accordance with applicable
United Kingdom accounting standards under the historical cost convention. The
principal accounting policies of the Group have remained unchanged from those
set out in the Group's 2002 Annual Report and Financial Statements.
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