Interim Results
Online Travel Corporation PLC
03 July 2003
FOR IMMEDIATE RELEASE 3rd JULY 2003
ONLINE TRAVEL CORPORATION PLC
RESULTS FOR THE SIX MONTHS TO 30TH APRIL 2003
The Directors of Online Travel Corporation plc ('OTC' or the 'Company') are
pleased to present the unaudited trading results for the six months ended 30th
April 2003.
HIGHLIGHTS
• 34% growth in gross sales to £47.9 million (2002: £35.7 million)
• 48% growth in leisure division sales to £31.0 million (2002: £20.9
million)
• 2002 acquisitions bedded down, cost reduction programme ongoing
• Adapted systems for major third party licensing contracts,
announcements expected shortly
• Net assets at 30th April 2003 of £9.7 million (including £1.9 million
in cash)
• Demographic expansion with the launch of Youthtravel.com
• Post-war recovery, leisure sales in May 2003 67% ahead of May 2002
• Acquisition of Deckchair.comand Leisurehunt.com
• £1.2 million equity funding to strengthen balance sheet
Chairman of OTC, Tommaso Zanzotto said:
'The results reflect a good performance in what was an extremely challenging
period for the travel industry. The growth in our leisure division's sales of 48
% shows the resilience of the online travel sector and the benefits of our
pioneering Build-Your-Own holiday technology. Looking ahead, we remain confident
that OTC will benefit from continued growth in the online travel sector and we
look forward to exploring the significant opportunities available to us from
licensing our systems to major third party travel companies.'
For further information, please contact:
Online Travel Corporation plc
Mark Jones, Managing Director Tel: + 44 (0) 20 8607 9281
Mark Simpkins, Finance Director Tel: + 44 (0) 20 8804 6742
CardewChancery
Richard Fallowfield Tel: + 44 (0) 20 7930 0777
Jeanette Hamster Tel: + 44 (0) 20 7930 0777
Chairman's Statement
As a result of the War in Iraq and SARS, the period under review was extremely
turbulent for the travel sector. Despite this we are pleased to report an
overall increase of 34% in gross sales over the period to £47.9 million, (2002:
£35.7 million) and earnings before interest, tax, depreciation and amortisation
(before web development costs and exceptional items) of £0.21 million.
During the period we have continued to increase distribution, to add to the
content of our sites and to effect operating efficiencies. The recent launch of
youthtravel.com highlights the flexibility built into our system that enables us
to provide targeted services to different demographic groups of consumers. The
recent acquisitions deckchair.com and leisurehunt.com and the rapid roll out of
services for their users demonstrates our ability to expand our customer base
quickly and effectively.
We have also adapted our booking systems to allow for their use by large third
party travel business and we expect to announce major contracts in this area in
the second half of this year.
As at 30th April 2003, the Company had cash balances of £1.9 million (2002: £1.7
million). The slowing in rate of sales growth in the second quarter had an
impact on cash balances and despite a recovery in cash levels since the period
end, the Directors considered it prudent to utilize the authority granted to
them by OTC shareholders and raise further cash to strengthen the Company's
balance sheet.
Pursuant to a subscription agreement dated 2nd July 2003, an aggregate of
5,800,000 new ordinary shares of 1p each in the Company are to be issued for cash
to two funds managed by Electra Partners, at a price of 21 pence per share,
raising £1.2m of working capital for the Company. Application will be made for
the admission of these new shares to trading on the Alternative Investment Market
of the London Stock Exchange.
We are encouraged by the recovery in sales growth experienced since the end of
hostilities in Iraq. In May 2003 we saw an increase in gross sales of 47%
compared to May 2002, led by growth of 67% in our leisure travel division. This
highlights the effectiveness of the improvements we have made to our sites and
products and indicates a general change in consumer demand patterns towards
online travel booking.
Our ability to grow our three incomes streams: from our own brands; from the
media sites we operate; and from new revenues from third party travel
businesses, places us in a good position to benefit from the continued growth in
online travel in Europe.
Tommaso Zanzotto
Chairman 3rd July 2003
Chief Executive's Review
Operational review
Growth in gross sales of over 60% during the first quarter was encouraging, but
the increased threat of terrorism, the war in Iraq and the impact of SARS
severely depressed demand and impacted sales growth in both the leisure and
business travel sectors during the second quarter of the year.
The directors are therefore pleased to report an overall increase in gross sales
in the six months to 30 April 2003 of 34% to £47.9m (2002: £35.7 million). The
leisure travel division continues to lead the group's growth, with an increase
in sales of 48% to £31.0 million. (2002:£20.9 million). This growth demonstrates
the quality of the Company's products, particularly its Build-Your-Own holiday
technology.
Gross profit increased to £6.1 million, (2002: £4.9 million), with a decline in
the overall gross margin percentage from 13.7% to 12.8%, primarily due to lower
margins at Allhotels.com and in our corporate travel division. We are encouraged
by the continued migration from retail to merchant bookings in the Allhotels.com
business and remain confident that the current recovery in sales will enable
gross margins in the leisure division to improve in the second half of the year.
EBITDA (before web development and exceptional costs) reduced by £0.67 million
to £0.21 million (2002: £0.88 million). This reduction is primarily a result of
the impact of external events on the sales growth in the second quarter, plus
the costs associated with acquisitions of Travelstore.com and Allhotels.com made
in the second half of 2002.
Direct costs from these acquisitions were included for a full period for the
first time, £0.88m for Travelstore.com and £0.56m for Allhotels.com. Cost
rationalisation programmes implemented at the time of acquisition reduced the
costs of both businesses substantially from pre-acquisition levels and the
Directors expect to obtain further cost savings during the second half of the
year.
We continue to expand OTC's client base across various sectors, and during the
period we demonstrated flexibility in our platform with the launch of a focused
demographic site for students and youth travelers via our own brand
Youthtravel.com. During the period we also increased the third party media sites
we operate with the launch of sites for Priceline.co.uk and FT.com.
During the period 11.1 million users visited our sites (2002: 8.1 million), and
the number of transactions increased to 272,000, 49% more than same period in
the previous year (2002: 182,000). The average value per transaction declined by
10%, reflecting the general reduction in prices by airlines and hotels. Our
customers have the choice to book online or via our call centers, but our focus
is on driving more business online to achieve the anticipated cost efficiencies
of electronic booking.
Our booking systems have been enhanced to allow the use by large third party
travel businesses and we expect to announce major contracts in this area in the
second half of this year.
The following pro-forma profit and loss account for the Group includes the sales
and associated costs of joint ventures and associates and the direct costs of
the two businesses acquired last year.
Six months Six months
to 30/04/03 to 30/04/02
£ million £ million
Gross Sales (Total Transaction Value) 47.87 35.71
Gross Margin 6.12 4.89
Call Centre Support 1.82 1.67
Sales & Marketing 0.73 0.58
Central Overhead & Administration 1.92 1.76
Travelstore Direct Costs 0.88 0.00
All Hotels Direct Costs 0.56 0.00
-------- --------
5.91 4.01
Profit from operations before 0.21 0.88
web development and exceptionals
Exceptional costs 0.61 0.16
Web development costs 1.29 0.89
Interest & finance costs 0.38 0.13
Depreciation & amortisation 0.84 0.67
Research & development credit -0.41 0.00
-------- --------
2.71 1.85
-------- --------
Net loss -2.50 -0.97
-------- --------
Excluding acquisitions, the operating costs increased by 11% to £4.47 million
(2002: £4.01 million) in line with expectations. We would highlight:
•an improvement in service levels which led to increased call center
support costs of £1.82 million (2002: £1.67 million).
•sales and marketing costs of £0.73 million (2002: £0.58 million), which
include our clients' gross profit and revenue shares. We believe this to be
significantly below the average customer acquisition cost in either the
online or the offline travel sector.
•general administration and overhead costs increasing to £1.92 million
(2002: £1.76 million). We expect to achieve further operational efficiencies
from scale and growth in online transactions.
Interest and bonding costs increased to £0.38 million (2002: £0.13 million)
reflecting increased volume of transactions and higher premiums in the insurance
bond market.
Web development and content costs increased to £1.29 million (2002: £0.89
million) reflecting the increased range and integration of travel products and
content on our own and client sites. This includes £0.36m of cost in relation to
the integration of Travelstore.com and Allhotels.com and the development of our
booking systems to enable their use by third party travel companies.
During the period the Company incurred exceptional costs, totalling £0.61
million. These consisted of bad debts of £0.31million from the non-recovery of
amounts due primarily from acquisitions and £0.29 million in respect of
termination payments and re-organisation costs of acquisitions.
Whilst we expect to generate savings through economies of scale, we also aim to
drive a higher proportion of transactions online. Technical developments include
a newly integrated order processing system that we expect to create internal
efficiencies. We expect a proportional reduction in costs to be derived from the
combined impact of our cost rationalization program and a higher percentage of
online bookings.
Divisional review
Leisure and new media
Our leisure division experienced the highest rates of growth during the period,
with increase in gross sales to £31.0 million, representing growth of 48% (2002:
£20.9 million).
The increase in sales is attributable to the expansion of our product range,
particularly our pioneering Build-Your-Own holiday technology, and an increase
in the transactions via our own brands, particularly Onlinetravel.comand a
strong season for our Winter Sports site Ifyouski.com.
Corporate travel
Taking into account a gross sales contribution from Travelstore of £5.2m,
overall gross sales in the division increased by 27% to £12.6 million (2002:
£9.9 million). On a like for like basis (excluding Travelstore) gross sales
reduced by 25% as a result of a general reduction in average transactional
values and the impact of the War in Iraq and SARS. We expect conditions in the
business travel sector to continue to be challenging.
Our Internet based travel management system is recognized as one of the most
advanced in the European market. The cost of maintaining our business travel
division impacted our results in the first half of the year, but the platform
puts us in a good position to benefit from the anticipated increase use by
corporate groups of online self-booking in 2004.
Trade concessions
The impact of War and SARS adversely affected our trade concession business,
resulting in a reduction of 12% in our gross sales to £4.3 million (2002: £4.9
million). Redundancies in the travel sector continue to make this a challenging
period, but we are encouraged that over 35% of concession transactions are now
online and we expect to benefit from cost efficiencies as this trend continues.
Acquisitions
On 16thJune 2003, the Company announced the acquisition of the e-travel brands
Deckchair.comand Leisurehunt.comfor an aggregate of £150,000 in cash.
Deckchair.com was one of the first e-travel brands in the UK, launched in 1998.
It has a database of 410,000 registered users with a profile similar to our own
brands, Onlinetravel.com and Bargainholidays.com. The redesigned Deckchair site,
launched on 19th June 2003 combines the best attributes of these sites and
includes our pioneering Build-Your-Own technology. In the last week of June,
Deckchair.com contributed over £70,000 of gross sales.
Leisurehunt.com is a leading hotel website, with 192,000 registered users who
have a profile that fits closely to OTC's main hotel site, Allhotels.com
The acquisitions of Deckchair.comand Leisurehunt.comwill enable us to cost
effectively build market share and provides an extended user base for of
potential BYO custom.
Outlook
OTC has experienced a good recovery in sales growth since the end of the Iraqi
war. In May 2003 our overall gross sales increased by 47% on May 2002, the main
driver again being growth of 69% in our leisure travel division
The main contribution to this growth was our Build-Your-Own holiday system,
which generates higher gross profit margins and, as a majority of these
transactions are completed online, results in a proportionate reduction in costs
as a percentage of sales. Our own umbrella brand, Onlinetravel.com has continued
to grow at a faster rate than any other site and in May 2003 generated more
bookings than any other site. Of these bookings 41% were BYO bookings.
The integration of the Allhotels.comsystem into the group and the expansion of
merchant inventory should further increase BYO bookings and improve margins in
the leisure division, particularly on the Allhotels.com site.
We have also adapted our booking systems to allow the use by large third party
travel business and we are in discussions with several large travel players
about using our products and services for their travel sites. We expect to
announce major new clients in the next few months.
Independent research still predicts considerable growth in the online travel
sector over the next five years, with the highest rates of growth in areas that
OTC is focused on, including dynamic packaging, the online hotel sector and
specialist activities. The continued integration of our specialist products and
sites puts us in a strong position to benefit from the anticipated growth.
Mark Jones
Chief Executive 3rd July 2003
Online Travel Corporation Plc
Consolidated profit and loss account for the 6 months to 30 April 2002
£000's 6 Months to 6 Months to Year Ended
30 April 2003 30 April 2002 31 Oct 2002
(Unaudited) (Unaudited) (Audited)
Total 47,868 35,710 85,503
Transaction
Value1
Group Turnover 41,340 30,148 70,239
Cost of sales (35,537) (25,647) (60,386)
_____ _______ _______
Gross profit 5,803 4,501 9,853
_____ _______ _______
Operating
Costs --------- -------- --------
Selling and (3,059) (2,132) (6,371)
distribution
costs
Administration (4,442) (2,501) (4,317)
costs
Operating costs (7,501) (4,633) (10,688)
before --------- -------- --------
depreciation and
goodwill
amortisation
EBITDA (1,698) (132) (835)
Depreciation (607) (533) (1,418)
Goodwill (238) (137) (326)
amortisation
Total Operating (8,346) (5,303) (12,432)
Costs --------- -------- --------
Group Operating Loss (2,543) (802) (2,579)
Share of associate company 12 7 187
profit/(losses)
Group Loss on (2,531) (795) (2,392)
Ordinary
Activities before
interest and
Taxation
______ ______ ______
Interest 33 16 25
receivable
Interest payable and (414) (190) (666)
similar charges
______ ______ ______
Online Travel Corporation Plc
Consolidated profit and loss account for the 6 Months to 30 April 2003
(continued)
GROUP LOSS ON ORDINARY (2,912) (969) (3,033)
ACTIVITIES BEFORE TAXATION
Taxation 411 - 473
______ ______ ______
Retained loss for the financial year (2,501) (969) (2,560)
______ ______ ______
Loss per share Pence Pence Pence
- Basic (2.2) (1.1) (2.6)
______ ______ ______
- Fully diluted (2.2) (1.1) (2.6)
______ ______ ______
1 Total transaction value does not represent the group's statutory turnover and
comprises amounts relating to the Group and its share of associates
Online Travel Corporation Plc
Consolidated Balance Sheet at 30 April 2003
£000's 6 Months Ended 6 Months Ended Year Ended
30 April 2003 30 April 2002 31 Oct 2002
(Unaudited) (Unaudited) (Audited)
Fixed assets
Intangible Assets 8,826 5,152 8,945
Tangible Assets 1,983 1,994 2,183
Investments in Associated 218 210 238
Undertakings
_______ _______ _______
Total Fixed Assets 11,027 7,356 11,366
_______ _______ _______
CURRENT ASSETS
---------- ---------- -------------
Debtors 6,393 4,893 5,890
Cash at bank and in 1,928 1,672 4,173
hand ---------- ---------- -------------
8,321 6,565 10,063
Creditors: amounts (9,671) (6,121) (9,161)
falling due within one ---------- ---------- -------------
year
Net current assets (1,350) 444 902
_______ _______ _______
Total Assets less current 9,677 7,800 12,268
Liabilities
Creditors: amounts (790) (880)
falling due after one
year
_______ _______ _______
NET ASSETS 8,887 7,800 11,388
_______ _______ _______
Capital and reserves
Called up share capital 1,158 919 1,142
Share premium account 16,348 11,407 15,972
Capital reserve 1,499 1,499 1,499
Other Reserve - - 391
Profit and loss account - (10,118) (6,025) (7,616)
deficit
_______ _______ _______
Total equity 8,887 7,800 11,388
shareholders' funds
_______ _______ _______
Online Travel Corporation Plc
Consolidated cashflow
£,000 6 Months to 30 6 Months to Year Ended
April 2003 30 April 2002 31 October 2002
(Unaudited) (Unaudited) (Audited)
Net cash inflow/(outflow) from (1,507) (1,226) (75)
operating activities
DIVIDENDS FROM JOINT VENTURES AND
ASSOCIATES
Income from associated _ 95
undertakings
Returns on investments and
servicing of finance
Interest received 33 16 25
Interest and similar charges (414) (190) (666)
paid
_______ _______ _______
Net cash outflow from returns on (381) (174) (641)
investments and servicing of
finance and dividends from
associates
_______ _______ _______
(1,888) (1,400) (621)
Taxation
Corporation tax paid 130 - -
Capital expenditure
Payments to acquire tangible (488) (915) (1,719)
assets
_______ _______ _______
(2,246) (2,315) (2,340)
Acquisitions and disposals
Purchase of subsidiary - - (437)
undertakings
Net cash acquired with subsidiary - - 655
undertakings
_______ _______ _______
(2,246) (2,315) (2,122)
Online Travel Corporation Plc
Consolidated cashflow (continued)
£,000 6 Months Ended 6 Months Ended Year Ended
30 April 2003 30 April 2002 31 October 2002
(Unaudited) (Unaudited) (Audited)
Net cash outflow before (2,246) (2,315) (2,122)
financing
FINANCING
Issue of ordinary share capital 1 1,850 3,676
Loans to associated undertakings - (19) (37)
New bank borrowings - - 500
Net cash inflow from financing 1 1,831 4,139
_______ _______ _______
Increase/(decrease) in cash (2,245) (484) 2,017
_______ _______ _______
Online Travel Corporation Plc
Notes (Unaudited)
1. Basis of Preparation
The summarised results for the six months to 30 April 2003 incorporated in
this announcement have been prepared in accordance with the accounting
policies adopted in the accounts for the year to 31 October 2002. These and
the comparative results for the six months to 30 April 2002 are non-statutory
accounts within the meaning of Section 240 of the Companies Act 1985 and have
not been reported on by the auditors under section 235 of the Companies Act
1985.
The comparative figures for the year ended 31 October 2002 are an abridged
version of the Company's full accounts and, together with other financial
information contained in these interim results do not constitute statutory
accounts of Online Travel Corporation plc within the meaning of Section 240
of the Companies Act 1985. The statutory accounts for the year ended
31 October 2002 have been delivered to the Registrar of Companies. The report
of the Auditors was not qualified and did not contain a statement under
Section 237 (2) and (3) of the Companies Act 1985.
2. Loss per
Share
6 Months Ended 6 Months Ended Year Ended 31
30 April 2003 30 April 2002 October 2002
(Unaudited) (Unaudited) (Audited)
Attributable (2,501) (969) (2,560)
profit/(loss)
(£)
_______ _______ _______
Average number 115,221 85,521 93,671
of ordinary
shares in
issue (000's)
_______ _______ _______
Basic loss per (2.2)p (1.1)p (2.7)p
share
_______ _______ _______
Fully diluted (2.2)p (1.1)p (2.7)p
loss per
share
_______ _______ _______
The fully diluted loss per share takes account of outstanding share options
and warrants. The calculation shows that the fully diluted loss per share is
lower than the undiluted loss and in accordance with the requirements
of FRS 14 this is not considered to be dilutive.
3. Reconciliation of Movement in
Shareholders'Funds
6 Months to 6 Months to Year Ended
30 April 2002 30 April 2002 31 October 2002
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Opening 11,388 7,002 7,002
shareholders'
funds
New share - 109 332
capital
subscribed
Share premium - 1,658 6,223
Shares to be - 391
issued
Loss for the (2,501) (969) (2,560)
financial
period
______ ______ ______
Closing (8,887) 7,800 11,388
shareholders'
funds
______ ______ ______
4. Reconciliation
of Operating
Loss to Net
Cash Outflow
from Operating
Activities
6 Months to 30 6 Months to 30 Year Ended 31
April 2002 April 2002 October 2002
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
============= =============== ================
Operating (2,543) (802) (2,579)
loss
Depreciation 607 533 1,418
of tangible
fixed assets
Amortisation 238 137 356
of goodwill
(Increase)/ (229) (1,031) 211
decrease in
debtors
Increase/ 420 (63) 519
(decrease) in
creditors
______ ______ ______
Net cash (1,507) (1,226) (75)
inflow/
(outflow) from
operating
activities
______ ______ ______
5. Reconciliation
of Net Cash
Flow to
Movement in
Net Cash
6 Months to 30 6 Months to 30 Year Ended 31
April 2002 April 2002 October 2002
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Increase/ (2,245) (484) 2,017
(decrease) in
cash in the
period
Net funds 4,174 2,156 2,156
brought
forward
______ ______ ______
Net fund 1,928 1,672 4,174
carried
forward
______ ______ ______
6. Interim Statement
A copy of this announcement will be circulated to all registered shareholders
of the company .Copies will be available to members of the public upon
application to the Registered Office at 12 Great James Street, London, WC1N 3DR.
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