Results for the year ended 30

RNS Number : 0407J

Holidaybreak PLC

27 November 2008

 



27 November 2008: For immediate release

HOLIDAYBREAK

Results for the year ended 30 September 2008

Holidaybreak, the education, leisure and activity travel group, today announces its full year results for the year ended 30 September 2008.

Financial highlights

	2008 £m	2007 £m
Group revenue	455.1	357.9
Headline profit before tax*	32.4	40.0
Statutory profit before tax	23.4	37.5
Headline basic EPS*	52.9 pence	59.4 pence
Statutory basic EPS	37.1 pence	54.5 pence
Net debt	161.3	146.5
Dividend per share	16.05 pence	32.10 pence

* Headline profits and earnings per share are stated before amortisation of acquired intangible assets of £4.2m (2007: £2.5m), exceptional restructuring costs of £2.3m (2007: £nil) and impairment of goodwill of £2.5m (2007: £nil) and the tax effect thereof £1.4m (2007: £0.1m). 

Summary

• Holidaybreak's businesses are market leaders in their specialist sectors. Their diversity gives trading resilience in the current difficult economic environment.  

• Education's revenue was £109.5m (2007: £26.1m). Revenue in 2007 related only to three months of trading following the acquisition of PGL. Headline** operating profit was £10.9m (2007: £8.5m).  For 2008/09, the division is 78% booked and showing a growth in sales of 8%. 

• Hotel Breaks' revenue was £149.9m (2007: £139.0m) and headline** operating profit was £15.5m (2007: £17.0m). Sales intake slowed markedly after May 2008 at Superbreak. For 2008/09, sales intake for the division is currently down approximately 15% reflecting weaker demand into London, in particular, and for short breaks generally. 

•  Adventure Travel's revenue was £94.6m (2007: £90.0m) and headline** operating profit was £4.8m (2007: £6.6m). Margins have been adversely affected by geopolitical events and fuel cost increases. For 2008/09 the division is 40% booked and showing growth in sales of 1%. 

• Camping's revenue was £101.1m (2007: £102.8m) on 5% lower capacity. Headline** operating profit was £13.8m (2007: £11.7m), the highest level for several years. Next year's bookings are in line with our expectations with approximately 34% of sales booked. 

• The Board today announces the appointment of Neil Bright, group finance director at HMV Group plc, as a Non-executive Director of the Board with immediate effect. 

Carl Michel, Group Chief Executive, said: 

"The Group's overall trading performance for the year was disappointing against our initial expectations for the year with an unsettled and unpredictable final quarter marking the start of the recession. Although the economic environment will remain difficult, the spread and diversity of our businesses gives the Group exposure to other European markets that will be differently affected by the uncertainty ahead providing us with additional resilience.  

The Group remains focused on delivering value for our customers and we believe that our businesses will perform satisfactorily in a recession. We are taking a number of steps and initiatives, including cutting costs, managing cash and reducing discretionary capital investment, to manage the business effectively in these challenging times."  

Enquiries:     

Carl Michel / Bob Baddeley	Holidaybreak   [phone]
James Hogan / Craig Breheny / Ash Spiegelberg	Brunswick [phone]

Note to Editors 

Holidaybreak (HBR.L) is an education, leisure and activity travel group listed on the London Stock Exchange. The Group's four operating divisions have market leading positions in the UK and other major European markets, organising educational and activity trips for UK school children, short breaks in the UK and Europe, worldwide adventure holidays and mobile-home and camping holidays on sites throughout Europe. For more information, please go to www.holidaybreak.co.uk.

**Reconciliation of headline to statutory operating profit and margin

2008	Education  £m	Hotel Breaks £m	Adventure Travel £m	Camping £m	Group £m
Headline operating profit**	10.9	15.5	4.8	13.8	45.0
Amortisation of other intangible assets acquired via business combinations	(2.9)	(0.9)	(0.4)	-	(4.2)
Impairment of goodwill	-	-	(2.5)	-	(2.5)
Exceptional restructuring costs	(1.8)	-	-	(0.5)	(2.3)
Operating profit	6.2	14.6	1.9	13.3	36.0

2007	Education £m	Hotel Breaks £m	Adventure Travel £m	Camping £m	Group £m
Headline operating profit**	8.5	17.0	6.6	11.7	43.8
Amortisation of other intangible assets acquired via business combinations	(0.8)	(1.1)	(0.6)	-	(2.5)
Operating profit	7.7	15.9	6.0	11.7	41.3

Chairman's Statement

Introduction

Holidaybreak continues to demonstrate the strength of owning businesses which are all leaders in their separate markets. This gives the Group resilience through their diversity of activity, as well as from their brand strength, and provides consumers with confidence in the current economic downturn. We continue to exploit opportunities to develop our businesses. In particular, this year we announced two acquisitions in the Education Division, European Study Tours and the Windmill Hill activity centre, which have enhanced our offering. 

Our employees are critical and their ability and willingness to adapt in these challenging times are a source of strength for the Group. I would like to thank all of them for their enthusiasm, hard work and dedication to serving our customers. 

Group results

For the year ended 30 September 2008, headline profit before tax* was £32.4m (2007: £40.0m) on revenue of £455.1m (2007: £357.9m). Statutory profit before tax was £23.4m (2007: £37.5m). Headline earnings per share* were 52.9p (2007: 59.4p). Statutory basic earnings per share were 37.1p (2007: 54.5p). 

Net debt at 30 September 2008 was £161.3m (2007: £146.5m), after spending £23.7m on capital expenditure and intangible assets net of disposal proceeds (2007: £16.4m) and £5.3m on acquisitions (2007: £39.7m). 

Refinancing

The width of LIBOR spread over bank base rate significantly increased the Group's interest charge and this has continued into 2008/09. Finance costs (net of investment income) increased from £3.8m in 2007 to £12.6m, principally due to the costs of the additional debt raised to purchase PGL and NST. Interest cover* reduced from 11.5 times in 2007 to a still prudent 3.5 times in 2008. Net interest was 4.6 times covered by operating cash flow.

In May 2008, Holidaybreak announced that it had refinanced the Group's five year committed debt facilities. The downturn in the Hotel Breaks Division later in the year, coupled with the heightened uncertainty of future trading in a recession and  LIBOR spreads, led the Board to seek a modification of the future covenants from the Group's lending banks for the remainder of the five year facility. The modified covenants give headroom to allow for the possibility of further adverse trading in 2009 and beyond and were agreed in November 2008.

Dividend

In the uncertain market conditions and given the need to reduce debt and to rebase dividend cover going forward, the Board is recommending a cut of the final dividend to 6.8p (2007: 23.3p), payable on 7 May 2009, to shareholders on the register on 3 April 2009, making a total of 16.05p (2007: 32.1p) for the year. 

Acquisitions and investment

In June, we announced the acquisition of Hertford Travel Group Limited, the holding company of educational tour operator European Study Tours ("EST") for a net consideration of £4.8m. EST now sits within our Education Division, allowing us to offer a wider range of tours and lead the higher and further education segment. Education is a key market sector for the Group and our enhanced offering will increase the division's growth prospects.

The Education Division also acquired a new site at Windmill Hill in Sussex in April for £2.5m. We will be investing over £4.0m to create a 450+ bed facility which is expected to open in May 2009. Bookings to date are strong.

Management and Board changes

The Board today announces the appointment of Neil Bright as a Non-executive Director of the Board with immediate effect. He will succeed James Wallace as Chairman of the Audit Committee when James retires from the Board on 31 December 2008. James Greenbury will succeed James Wallace as Senior Independent Director with effect from 1 January 2009.

Neil is group finance director at HMV Group plc. He joined HMV in August 1996 as group finance director from its parent company, Thorn EMI plc, and was appointed to the HMV board as finance director in March 1998. He brings with him extensive experience in a consumer-facing and international business. 

Chris Stephens was appointed a Non-executive Director of the Board on 1 July 2008. Chris succeeded Sally Martin as Chairman of the Remuneration Committee when Sally stood down from the Board on 16 July 2008. Chris has held high level positions with a number of companies and brings with him extensive strategic planning experience from a wide range of industries. 

Mark Wray stood down from the Board on 31 May 2008 due to family bereavement. He remains Joint Managing Director of the Hotel Breaks Division.

I would like to thank James, Sally and Mark for their invaluable contributions during their time on the Board and for their service to the Company.

My second three year term as Chairman comes to an end in June 2009 when I will retire from the Board. The Nomination Committee has already commenced a search for my successor.

Articles of Association

Changes to the Company's articles of association will be proposed at the forthcoming Annual General Meeting to take account of changes introduced by the Companies Act 2006.

Outlook

The Board recognises that the economic environment will remain difficult. The spread and diversity of our businesses gives the Group exposure to other European markets that will be differently affected by the uncertainty ahead providing us with additional resilience.  

The Group remains focused on delivering high levels of service and value for our customers and we believe that our businesses will perform satisfactorily in a recession. We are taking a number of steps and initiatives, including cutting costs, managing cash and reducing discretionary capital investment, to manage the business effectively in these challenging times.  

Robert Ayling

Chairman

* Headline profits, operating margin, earnings per share and interest cover are stated before amortisation of acquired intangible assets of £4.2m (2007: £2.5m), exceptional restructuring costs of £2.3m (2007: £nil), impairment of goodwill of £2.5m (2007: £nil) and the tax effect thereof £1.4m (2007: £0.1m). 

  Business and Financial Review

Group strategy

After the transformation of last year with the creation of the Education Division, this year was always planned to be one of consolidation. We made two small acquisitions that increased our bed stock at PGL and our presence in the higher and further education travel markets. 

We continue to pursue our four strategic themes. We have had some notable successes this year on leveraging synergies - such as NST working with West End Theatre Bookings to create theatre trips for schools, and Explore and PGL are working on a school study travel product. In terms of a multi-path approach we have switched the emphasis from acquisitions to organic growth initiatives. Our capital spend is largely focused on adding beds at PGL's UK adventure centres where we see the best opportunities to pursue sustainable faster growth. It is certain that consumer spending will be under pressure next year and therefore we believe it is appropriate to channel resources into the education arena. In terms of diversifying our sales mix, the current sterling weakness is allowing us to increase the proportion of Camping's sales generated outside the UK.  

Inevitably the turmoil in the world's financial markets has not passed us by. Borrowing costs have increased substantially despite the recent sharp reduction in central bank base interest rates. There has been a change in the perception of debt with a new preference for reducing leverage where possible. We continue to believe that our balance sheet structure is efficient. In the short term, we expect less acquisition activity as the primary focus will be to increase cash generation. 

Overall, the recession will re-emphasise some of our core strengths - a relentless focus on value and on the consumer. Our aim is to emerge from the downturn with stronger brands in what may be a rather different competitive environment.

Trends and factors affecting the Group

The general economic environment is much more challenging than last year and disposable incomes are being squeezed. However, the spread of our businesses across different travel segments and in various European markets provides us with trading resilience. 

We believe our Education Division is less exposed to discretionary consumer spending. It also enjoys strong forward booking visibility, for example, we have already sold 96% of target revenue for PGL's UK adventure centres for 2008/09. 

Similarly, we believe Camping is well placed as our brands offer families good value for money holidays that generally involve a relatively low environmental impact. 

Our adventure travel businesses operate in 'niches' which do not rely on large volumes of customers and we believe the trend towards seeking experiences and learning, rather than just simple indulgence, will drive growth. 

Our Hotel Breaks Division is most likely to be exposed to short-term demand fluctuations as disposable incomes are squeezed. However, the business has low operational gearing with room allocations not committed. This gives a relatively high flexibility of costs. It will also benefit from being able to offer more special value deals.

Consumers seek reassurance from long-standing and trustworthy brands with a commitment to customer service. We believe our strong position in each of the markets we operate in, with high levels of repeat business and multi-channel distribution, is an advantage over our competitors. We expect the growth in online spending to continue, albeit at a slightly slower rate, and we will continue to invest in e-commerce to ensure that we reach the widest possible audience. Equally, we retain our commitment to trade partners and more 'traditional' sales methods, such as brochures and call centres. 

It is very clear that the recession will impact our competitors. Smaller players may exit the market. Meanwhile larger tour operators are reducing capacity in lower margin holidays. The impact is likely to result in significant capacity reductions in the UK and ensure that yields hold up well. Similar, but less pronounced effects, may occur in the other European markets in which we operate.

Current trading

Group sales intake to date is currently up 1%. 

The Education Division is performing well with 78% booked and revenue 8% up on the comparable period for 2007/08.

The Hotel Breaks Division's sales intake (incorporating Bookit's intake based on total transaction value) across the division is approximately 15% down on the comparable period for 2007/08 reflecting weaker demand into London, in particular, and for short breaks generally.

The Adventure Travel Division is currently 40% booked and revenue is 1% higher than in 2008. 

The Camping Division is currently approximately 2% below last year's sales intake (based on bookings received to date). Capacity will be marginally adjusted (-4%) for the 2009 season to reflect modest shifts in demand away from tented accommodation. 

Group results

In the year to 30 September 2008 headline profit before tax* fell by 19.0% to £32.4m. Statutory profit before tax was £23.4m (2007: £37.5m). The increased profits from a full year's contribution from the Education Division businesses bought in 2007 were more than offset by increased interest costs. Net debt increased by £14.8m to £161.3m. 

Divisional performance, operating profit & margins

Group revenue in 2008 was up 27% on 2007 at £455.1m (2007: £357.9m). Headline operating profit* was 3% higher than 2007 at £45.0m (2007: £43.8m). Headline operating margin* reduced to 9.9% (2007: 12.2%).  

We have incurred one-off costs of £2.3m in respect of the closure of offices in Cambridge in the Education Division and Zurich in the Camping Division.

Education

	2008	2007
Revenue	£109.5m	£26.1m
Headline operating profit**	£10.9m	£8.5m
Operating profit	£6.2m	£7.7m

Education was formed from the acquisitions of PGL and NST in June and September of last year respectively and was enlarged by the purchase of European Study Tours (EST) for a net consideration of £4.8m in June 2008. This year, the division also purchased Windmill Hill, a potential 450+ bed capacity centre in Sussex, at a cost of £2.5m; an additional £4.0m will be spent on improvements to enable the centre to open in May 2009. Further capacity was added by increasing bed stock in the UK at several existing PGL sites and by hiring in additional sites to meet seasonal demand. Going forward, we expect to spend £4m on other site improvements in 2009.

Hotel Breaks

	2008	2007
Revenue	£149.9m	£139.0m
Headline operating profit**	£15.5m	£17.0m
Operating profit	£14.6m	£15.9m

The performance in this division reflects weaker demand into London from the end of May onwards. Going forward, hotel leisure rates have started to decline, which will allow more special value deals to be offered. There are fewer big hit theatre shows and exhibitions compared to this time last year but comparatives should ease by spring 2009. 

Adventure Travel

	2008	2007
Revenue	£94.6m	£90.0m
Headline operating profit**	£4.8m	£6.6m
Operating profit	£1.9m	£6.0m

Civil unrest in Kenya and Tibet and the lack of capacity in the Antarctic (following the sinking of the cruise ship MS Explorer) reduced revenues from these destinations by an estimated £5m and adversely affected operating margins. In the summer, Tailormade Explore, catering for individual adventure travellers, was successfully launched. Going forward, revenues will increase by virtue of the inclusion of 'local' ad hoc payments and higher airline fuel surcharges into the overall selling price.

Camping

	2008	2007
Revenue	£101.1m	£102.8m
Headline operating profit**	£13.8m	£11.7m
Operating profit	£13.3m	£11.7m

Camping achieved its highest profit for several years. Revenue was down 2% compared with last year in the context of a 5% reduction in capacity with occupancy levels increasing by 2%. Going forward, the stronger Euro will increase yields from Dutch, Irish and German bookings, thereby underlining the trading resilience of this division. For the 2009 season, capacity will be marginally reduced by 4%. The division continues to focus on improving occupancy and maximising yields.

Interest

Finance costs (net of investment income) increased from £3.8m in 2007 to £12.6m, principally due to the costs of the additional debt raised to purchase PGL and NST. Interest cover* reduced from 11.5 times in 2007 to 3.5 times in 2008. Net interest was 4.6 times covered by operating cash flow.

Taxation

The tax charge, including full provision for deferred tax, was £5.4m and the tax rate of 23% was lower than 2007 as corporate tax rates in the UK and the European markets in which we operate, declined. The underlying rate going forward is expected to remain at this level for the foreseeable future.

Earnings per share & dividends

Headline basic earnings per share* were 52.9p (2007: 59.4p) a reduction of 10.9%. Statutory basic earnings per share were 37.1p (2007: 54.5p).

The Board is recommending a final dividend of 6.8p per ordinary share representing a reduction of 71% compared to 2007. This gives a total dividend for the year of 16.05p per ordinary share (2007: 32.10p). This is covered 3.3 times by headline basic earnings per share* (2007: 1.9 times).

Impairment of goodwill

Following the collapse of XL Leisure Group in September 2008 the profitability and prospects of our subsidiary business Regaldive, which operates principally in the Middle East, was significantly adversely affected. We have therefore fully impaired the residual goodwill which we purchased with the acquisition of Regaldive in 2000 by £2.5m.

Balance sheet

Net assets of the Group decreased to £73.2m (2007: £73.7m).  Net debt gearing*** at 30 September 2008 was 220% compared to 199% at the previous year end. Goodwill arising via acquisitions was £5.1m. 

Cash flow and bank facilities 

The Group's net borrowings at 30 September 2008 were £161.3m, compared to £146.5m at the previous year end. Cash flow from our operating activities was £59.0m (2007: £36.8m). Net cash consideration on the acquisition of subsidiaries was £5.3m (2007: £39.7m). This related to the acquisition of EST in June 2008 and two small acquisitions of Select Sites and Divantoura.

In May 2008, Holidaybreak announced that it had refinanced the Group's five year committed debt facilities. The downturn in the Hotel Breaks Division later in the year, coupled with the heightened uncertainty of future trading in a recession and  LIBOR spreads, led the Board to seek a modification of the future covenants from the Group's lending banks for the remainder of the five year facility. The modified covenants give headroom to allow for the possibility of further adverse trading in 2009 and beyond and were agreed in November 2008.

This has resulted in an increase in the Group's finance charges as the margin we will be paying on borrowings is increased from 1.3% above LIBOR to 3.25%. We have also incurred amendment fees of £2.7m. These, together with the fees previously charged of £2.6m, will be amortised to the income statement over the five year facility. 

Due to the highly seasonal nature of the Group's cash flow, headroom under the Group's borrowing facilities was £31.0m at the end of April 2008 when borrowings and facility utilisation are historically at their maximum. In addition to these facilities, we have hire purchase agreements with various UK financial institutions to finance the purchase of mobile-homes. Just over half of annual expenditure on mobile-homes is financed from this source.

Capital expenditure

Capital expenditure (net of receipts from disposals) in the year to 30 September 2008 was £19.8m (2007: £12.9m).The purchase of mobile-homes for £13.3m accounted for the majority of the total expenditure. Sales of mobile-homes generated £3.1m (2007: £3.0m). 

We also purchased Windmill Hill, to be developed as an activity centre for the Education Division, for a consideration of £2.5m. 

We expect Group net capital expenditure in 2009 to be approximately £20m, including a further £4.0m in respect of developing capacity at Windmill Hill. Accommodation capacity in the Camping Division will be reduced by a further 4% in 2008/09.

Disposal proceeds in respect of mobile-homes sold at the end of their useful life achieved net book value. 

Annual maintenance capital expenditure is likely to be c.£3m. 

Financial risk management policies

The Group considers itself to be exposed to risks on financial instruments, including market risk (including currency risk), credit risk, liquidity risk and cash flow interest rate risk. 

The Group uses derivative financial instruments to hedge these risk exposures and therefore reduce the exposure of the Group. The use of financial derivatives is governed by the Group's policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the Board of Directors continuously by way of a formal report to each monthly Board meeting. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. 

Market risks

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including: 

• interest rate swaps to mitigate the risk of movements in interest rates.

• forward foreign exchange contracts to reduce the exposure to, principally, Euros and US Dollars but also to Australian Dollars, New Zealand Dollars, Danish Krone and Swiss Francs. 

The availability of finance has a direct impact on the pricing risk of the financing. In the current economic climate, the pricing risk has increased, due to the availability of finance being restricted. As outlined above, we have recently concluded a refinancing agreement with our lending banks.

Foreign currency risk management

The Group is exposed to foreign currency risks via its transactions denominated in foreign currencies. Exchange rate exposures are managed within approved policies set out by the Board of Directors. 

In addition to the economic hedging obtained by the Group, which is managed by the preparation of local currency cash flow forecasts, the Group purchases currency derivatives to hedge significant future transactions and cash flows. The contracts are denominated in foreign currencies noted above.

At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts that the Group has committed to is as below:

	2008	2007
Forward foreign exchange contracts	£37.8m	£30.4m

These arrangements are designed to address significant exchange exposures until September 2009 and are renewed on a revolving basis as required.

Interest rate risk management

The Group is exposed to interest rate risk as entities in the Group borrow funds at floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts.  

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk.

The Directors have considered the counterparty risk associated with the cash and derivative balances and do not consider there to be a material risk. The Group manages the credit risk associated with its bank and cash balances by ensuring that an appropriate spread of financial institutions are used in which to place these assets. The concentration of credit risk from trade receivables is limited due to the customer base being large and unrelated. In addition, the creditworthiness of each customer is considered in advance of making the sale.

Liquidity risk management

The Group manages liquidity risk by maintaining adequate liquid funds and banking facilities. We have a £265m committed five year credit facility with a syndicate of six leading UK and Irish banks. This facility is sufficient to meet the working capital and bonding requirements of the Group. At 30 September 2008 we had headroom under this facility of £57.7m. We continuously monitor forecast and actual cash flows and actual and forecast compliance with covenants within the facility. We concluded that, in the current economic climate, the liquidity risk has increased and in response to this risk the Group has recently completed, as outlined above, a modification of the future covenants for the remainder of the five year facility.

Changes in accounting policies 

During the year ended 30 September 2008, there were no changes in accounting policies.

Principal risks and uncertainties facing the Group

The Board regularly reviews the risks faced by the Group, including social, environmental and ethical risks. The Directors consider that the major risks to delivering the Group's strategy are those set out below. The Board recognises that the profile of risks changes constantly and additional risks not presently known, or that are currently deemed immaterial, may also impact on delivery of the Group's strategy.

Key risks	Impacts	Mitigation strategy
EXTERNAL
Economic and financial turmoil across markets	A fall in consumer confidence may lead to a reduction in levels of demand for our products.	Our mix of businesses across different travel segments in various European markets provides us with trading resilience.  We actively seek to redirect business to markets that are less affected by the recession.
Foreign exchange and interest rates	Fluctuating exchange rates will have financial implications for the Group (transaction and translation) and could impact the consumer demand for the respective market. Fluctuating interest rates will have an impact on the Group's costs and borrowings.	The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including: -          forward foreign currency exchange contracts to hedge significant future transactions and cash flows; -          interest rate swaps to mitigate the risk of fluctuating interest rates over the medium to long term.
Availability of external capital	A fall in share price and/or loss of confidence could restrict the availability of equity capital. Turmoil in the debt markets increases the cost of debt and reduces capacity.	We focus on improving profitability and cash flow and managing the investor relations programme effectively to maximise investor confidence.  We maintain good relations with debt providers and manage the business within agreed covenants.
Consumer demand	A change in consumer tastes could impact demand levels	We carefully track any changes to consumer tastes through customer insight teams/focus groups and adapt our product offering as necessary.
Major external events	Our businesses, particularly within the Education and Adventure Travel Divisions, are exposed to external events. For example, a major incident overseas may require the Adventure Travel Division to rearrange itinerary timings and/or routings. A fire or outbreak of a contagious disease is likely to have a significant impact on the ability of the affected PGL activity centre(s) to continue in operation.	All of our businesses have procedures in place to handle any external incidents to ensure any disruption is kept to a minimum. The Adventure Travel Division mitigates the risk by offering tours to more than 130 countries worldwide.
Terrorist (or similar) incident in London	A major terrorist (or similar) incident in London could have a significant impact on Superbreak, WETB and NST.	The Hotel Breaks Division, which is more exposed to London, has mitigated the risk by expanding its overseas programme.
INTERNAL
Cash generation in current financial climate	Due to external factors, we may not generate sufficient cash for re-investment in our businesses (e.g. activity centres, mobile-homes) or for acquisitions.	The Group will focus on increasing cash generation across its businesses and selling off non-core assets.
Health, safety & security	The risk that the company fails to manage health, safety and security issues leading to significant financial and operational costs.	Our businesses are committed to ensuring the highest standards of health, safety and security in their operations and monitor and conduct regular audits when appropriate. All divisions produce monthly health & safety reports. Issues noted as significant are considered at the Board meeting.
Failure to retain key employees	We may be put at competitive risk if we fail to retain key employees	Our people, including call centre and administration staff, tour leaders, couriers and activity staff, are our most important assets. We believe our training programmes and incentive arrangements provide the necessary tools to retain key staff. Next year we will be introducing a senior executive development programme.

Summary

The current year will be extremely challenging given the recession and the significantly higher finance costs. However, our businesses are well managed and enjoy a good spread across different travel segments in various European markets. 

The priority for 2008/09 will be to focus on value for our customers by offering great customer service and unique products. Strategically, we will continue to develop organic initiatives whilst managing our financial resources carefully to increase cash generation. 

Carl Michel	Bob Baddeley
Group Chief Executive	Group Finance Director

 

 

* Headline profits, earnings per share and interest cover are stated before amortisation of acquired intangible assets of £4.2m (2007: £2.5m), exceptional restructuring costs of £2.3m (2007: £nil), impairment of goodwill of £2.5m (2007: £nil) and the tax effect thereof £1.4m (2007: £0.1m). 

** Divisional operating profit is stated before amortisation of acquired intangible assets, exceptional restructuring costs and impairment of goodwill as set out in note 2 of the attached financial information.

*** Net debt gearing is net debt expressed as a percentage of year end net assets 

Cautionary statement

The full year results announcement has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. The full year results announcement should not be relied on by any other party or for any other purpose. The full year results announcement contains certain forward-looking statements. These statements are made by the Directors in good faith based upon the information available to them up to the time of their approval of this announcement and such statements should be treated with caution due to the inherent uncertainties underlying such forward-looking information.

Consolidated income statement

Year ended 30 September 2008

	Note	2008 £m	2007 £m
Group revenue - continuing operations	1	455.1	357.9
Net operating costs		(419.1)	(316.6)
Net operating costs before amortisation of other intangible assets acquired via business combinations, impairment of goodwill and exceptional restructuring items		(410.1)	(314.1)
Amortisation of other intangible assets acquired via business combinations		(4.2)	(2.5)
Impairment of goodwill		(2.5)	-
Exceptional restructuring costs		(2.3)	-
Operating profit		36.0	41.3
Investment income		1.8	1.6
Finance costs		(14.4)	(5.4)
Profit before tax		23.4	37.5
Tax	3	(5.4)	(11.3)
Profit for the year		18.0	26.2
Attributable to:
Equity holders of the parent		18.0	26.2
Earnings per share
Basic	5	37.1	54.5p
Diluted	5	37.1	54.1p
Headline earnings per share
Basic	5	52.9	59.4p
Diluted	5	52.9	59.0p

Consolidated statement of recognised income and expense

Year ended 30 September 2008

	2008 £m	2007 £m
Exchange differences on translation of foreign operations	(1.9)	0.6
Actuarial (losses) gains on defined benefit pension schemes	(1.0)	0.1
Tax on items recognised directly in equity	0.1	-
Net (expense) income recognised directly in equity	(2.8)	0.7
Profit for the year	18.0	26.2
Total recognised income and expense for the year	15.2	26.9
Attributable to:
Equity holders of the parent	15.2	26.9

Consolidated balance sheet

30 September 2008

			Restated*
	Note	2008 £m	2007 £m
Non-current assets
Goodwill		145.7	139.7
Other intangible assets		30.5	31.4
Property, plant and equipment		175.0	166.9
Defined benefit pension asset		-	0.4
		351.2	338.4
Current assets
Inventories		2.6	4.1
Trade and other receivables		36.6	33.5
Cash and cash equivalents	6	44.7	59.7
		83.9	97.3
Non-current assets classified as held for sale		1.1	1.8
Total assets		436.2	437.5
Current liabilities
Trade and other payables		(122.1)	(116.1)
Provisions for restructuring costs		(1.3)	-
Current tax liabilities		-	(7.8)
Obligations under finance leases		(6.0)	(5.7)
Interest bearing loans and borrowings		(13.0)	(49.4)
		(142.4)	(179.0)
Net current liabilities		(58.5)	(81.7)
Non-current liabilities
Deferred tax liabilities		(33.2)	(33.7)
Obligations under finance leases		(15.2)	(10.8)
Defined benefit pension liability		(0.4)	-
Interest bearing loans and borrowings		(171.8)	(140.3)
		(220.6)	(184.8)
Total liabilities		(363.0)	(363.8)
Net assets		73.2	73.7
Equity
Share capital		2.4	2.4
Share premium account		38.9	38.9
Own shares		(2.6)	(2.6)
Other reserves		1.1	1.3
Retained earnings		33.4	33.7
Total equity		73.2	73.7

* During the current year ended 30 September 2008, the Group completed its initial accounting in respect of the acquisition of PGL Holdings Limited, NST Holdings Limited and West End Theatre Bookings Limited. This resulted in a reduction in the fair value of intangible assets of £2.9m, a reduction in the fair value of property, plant and equipment of £1.7m, and related reductions in deferred tax of £3.3m, with a corresponding net increase in goodwill of £1.3m. 

The 2007 comparative information has been restated to reflect this adjustment. This restatement has no impact on reported profits, equity or cash flow in the year ended 30 September 2007.

Consolidated cash flow statement
Year ended 30 September 2008

		Note	2008 £m	2007 £m
Reconciliation of operating profit to cash generated from operating activities
Cashflow from operating activities
Operating profit			36.0	41.3
Adjustments for:
Amortisation of other intangible assets			5.9	3.3
Depreciation of property, plant and equipment			13.8	11.1
Share based payment (credit) charge			(0.1)	0.6
Decrease (increase) in inventories			1.5	(2.1)
(Increase) in receivables			(1.9)	(5.9)
(Decrease) increase in payables			3.8	(11.5)
Cash inflow from operating activities			59.0	36.8
Tax paid			(13.1)	(9.0)
Net cash from operating activities			45.9	27.8
Investing activities
Acquisitions of subsidiaries net of cash acquired		7	(5.3)	(39.7)
Purchase of intangible assets			(3.9)	(3.5)
Purchases of property, plant and equipment			(26.5)	(16.8)
Proceeds on disposal of property, plant and equipment			6.7	3.9
Net cash used in investing activities			(29.0)	(56.1)
Financing activities
Finance costs paid			(14.0)	(4.3)
Interest received			2.4	2.1
Proceeds on issue of new ordinary shares			0.1	1.0
Proceeds on exercise of share options			-	0.6
New bank loans raised			-	44.0
New finance leases			10.4	10.3
Repayment of borrowings			(13.9)	-
Payments under finance leases			(5.7)	(5.4)
Dividends paid			(15.7)	(14.5)
Net cash from financing activities			(36.4)	33.8
Net (decrease) increase in cash and cash equivalents			(19.5)	5.5
Cash and cash equivalents at beginning of period			58.8	53.3
Effect of foreign exchange rate changes			2.4	-
Cash and cash equivalents at end of year		6	41.7	58.8

1. Revenue

		2008	2007
		£m	£m
Revenue - continuing operations		455.1	357.9
Investment income (see note 5)		1.8	1.6
		456.9	359.5

Revenue from continuing operations is generated by the provision of services. Investment income arises from bank interest and income from the defined benefit pension scheme.

2. Business and geographical segments

Since the previously issued financial statements management has reviewed its segments in respect of the allocation of interest-bearing liabilities, income tax and intangible assets. Interest-bearing assets and income tax balances are allocated to corporate assets and intangible assets including goodwill are allocated to the respective division. The 2007 segments have been restated for the impact of this change.

Business segments

For management purposes, the Group is currently organised into four operating divisions - Education, Hotel Breaks, Adventure Travel and Camping. These divisions are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below. 

2008	Education  £m	Hotel Breaks £m	Adventure Travel £m	Camping £m	Consolidated £m
Revenue
Total revenue	109.5	149.9	94.6	101.1	455.1
Result
Operating profit before amortisation of other intangible assets acquired via business combinations, impairment of goodwill and exceptional restructuring costs	10.9	15.5	4.8	13.8	45.0
Amortisation of other intangible assets acquired via business combinations	(2.9)	(0.9)	(0.4)	-	(4.2)
Impairment of goodwill	-	-	(2.5)	-	(2.5)
Exceptional restructuring costs	(1.8)	-	-	(0.5)	(2.3)
Segment result	6.2	14.6	1.9	13.3	36.0
Investment income					1.8
Finance costs					(14.4)
Profit before tax					23.4
Tax					(5.4)
Profit for the year					18.0

The Adventure Travel segment includes £2.5m (2007: £nil) in respect of an impairment charge in relation to goodwill recognised on the acquisition of Regal Diving and Tours Limited.

The exceptional restructuring costs in the Education and Camping segments of £1.3m and £0.3m respectively relate to redundancy and reorganisation costs incurred by the respective division.

  2.  Business and geographical segments (continued)

2008	Education  £m	Hotel Breaks £m	Adventure Travel £m	Camping £m		Consolidated £m
Other information
Capital additions1	10.6	3.0	1.3	16.8	31.7
Depreciation and amortisation	6.6	1.8	1.0	10.1	19.5
Non-current assets held for sale2	-	-	-	1.1	1.1
Balance sheet
Assets
Segment assets	224.1	47.5	57.8	61.6	391.0
Unallocated corporate assets					45.2
Consolidated total assets					436.2
Liabilities
Segment liabilities	(39.3)	(42.4)	(25.3)	(14.0)	(121.0)
Unallocated corporate liabilities					(242.0)
Consolidated total liabilities					(363.0)

1 Includes additions of other intangible assets and property, plant and equipment in addition to acquisitions of subsidiary intangible assets and property, plant and equipment.

2 Non-current assets held for sale are mobile-homes held within the Camping Division and are expected to be sold within twelve months of the year end.

2007 (Restated)	Education £m	Hotel Breaks £m	Adventure Travel £m	Camping £m	Consolidated £m
Revenue
Total revenue	26.1	139.0	90.0	102.8	357.9
Result
Operating profit before amortisation of other intangible assets acquired via business combinations	8.5	17.0	6.6	11.7	43.8
Amortisation of other intangible assets acquired via business combinations	(0.8)	(1.1)	(0.6)	-	(2.5)
Segment result	7.7	15.9	6.0	11.7	41.3
Investment income					1.6
Finance costs					(5.4)
Profit before tax					37.5
Tax					(11.3)
Profit for the year					26.2

  2.     Business and geographical segments (continued)

2007 (Restated)		Education  £m		Hotel Breaks £m		Adventure Travel £m		Camping  £m		Consolidated £m
Other information
Capital additions1		139.0		3.3		0.7		14.3		157.3
Depreciation and amortisation		1.6		2.4		1.5		8.9		14.4
Non-current assets held for sale2		-		-		-		1.8		1.8
Balance sheet
Assets
Segment assets		214.5		46.6		58.1		58.5		377.7
Unallocated corporate assets										59.8
Consolidated total assets										437.5
Liabilities
Segment liabilities		(29.4)		(48.7)		(21.9)		(10.9)		(110.9)
Unallocated corporate liabilities										(252.9)
Consolidated total liabilities										(363.8)

1 Includes additions of other intangible assets and property, plant and equipment in addition to acquisitions of subsidiary intangible assets and property, plant and equipment.

2 Non-current assets held for sale are mobile-homes held within the Camping Division and are expected to be sold within twelve months of the year end.

Geographical segments

The following table provides an analysis of the Group's revenue by geographical market:

		2008 £m	2007 £m
United Kingdom		355.3	260.1
Ireland		6.4	7.6
Netherlands and Belgium		64.6	61.0
Germany, Switzerland and Austria		25.6	23.1
Other		3.2	6.1
		455.1	357.9

2.  Business and geographical segments (continued)

Geographical segments

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:

		Carrying amount of segment assets		Additions to property, plant and equipment and other intangible assets
		2008 £m	2007 (restated) £m	2008 £m	2007 £m
United Kingdom		334.2	340.8	14.5	109.4
Ireland		3.7	4.2	-	-
Netherlands and Belgium		21.0	19.4	2.3	1.2
Germany, Switzerland and Austria		3.5	12.2	0.2	0.4
France		56.1	46.5	9.6	17.4
Italy		10.8	9.3	3.2	2.7
Spain		5.8	3.9	1.7	1.1
Other		0.9	1.2	0.2	0.3
		436.0	437.5	31.7	132.5

  3.     Tax

	2008 £m	2007 £m
UK Corporation tax
- charge for the year	4.0	8.7
- adjustment in respect of prior years	(1.1)	(0.3)
Foreign taxation
- charge for the year	3.3	3.1
- adjustment in respect of prior years	(0.5)	0.1
Deferred tax
- charge for the year	0.1	(0.3)
- adjustment in respect of prior years	(0.4)	-
Tax expense for the year	5.4	11.3

UK corporation tax is calculated at 28% (2007: 30%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The adjustment in respect of prior years includes £0.5m (2007: £nil) in respect of the release of amounts provided on overseas earnings.

The charge for the year can be reconciled to the profit per the income statement as follows:

	2008 £m	2007 £m
Profit before tax	23.4	37.5
Tax at the UK corporation tax rate of 28% (2007: 30%)	6.5	11.3
Tax effect of expenses not deductible in determining taxable profit	1.3	0.2
Amount provided in respect of overseas earnings	-	0.4
Effect of reduction in UK corporation tax rate	0.2	(0.3)
Effect of different tax rates of subsidiaries operating in other jurisdictions	(1.1)	(0.1)
Adjustments in respect of prior years	(1.5)	(0.2)
Release of amounts provided on overseas earnings	(0.5)	(0.2)
Overseas dividends eliminated on consolidation	0.5 .5	0.2
Tax expense for the year	5.4	11.3

4.    Dividends

	2008 £m	2007 £m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 September 2007 of 23.3p (2006: 21.2p) per share	11.2	10.2
Interim dividend for the year ended 30 September 2008 of 9.25p (2007: 8.8p) per share	4.5	4.3
	15.7	14.5
Proposed final dividend for the year ended 30 September 2008 of 6.8p (2007: 23.3p) per share.	3.3	11.2

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

5.         Earnings per share 

The calculation of the basic and diluted earnings per share is based on the following data:

Earnings	2008 £m	2007 £m
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	18.0	26.2
	2008	2007
	Number	Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	48,350,099	48,198,488
Effect of dilutive potential ordinary shares:
Share options and awards	24,731	347,615
Weighted average number of ordinary shares for the purposes of diluted earnings per share	48,374,830	48,546,103
	2008	2007
	Pence	Pence
Earnings per share
Basic	37.1	54.5
Diluted	37.1	54.1

Headline earnings	2008 £m	2007 £m
Net profit attributable to equity holders of the parent	18.0	26.2
Add back:
Amortisation of other intangible assets acquired via business   combinations	4.2	2.5
Impairment of goodwill	2.5	-
Exceptional restructuring costs	2.3	-
Tax effect of the above	(1.4)	(0.1)
Headline earnings	25.6	28.6
	2008	2007
	Pence	Pence
Headline earnings per share
Basic	52.9	59.4
Diluted	52.9	59.0

6.    Analysis of cash and cash equivalents and reconciliation to net debt

	1 October 2007	Cash flow	Foreign exchange	Non cash movements	30 September 2008
Group	£m	£m	£m	£m	£m
Cash at bank and in hand	59.7	(17.4)	2.4	-	44.7
Overdrafts	(0.9)	(2.1)	-	-	(3.0)
Cash and cash equivalents	58.8	(19.5)	2.4	-	41.7
Debt due within one year	(48.5)	38.5	-	-	(10.0)
Debt due after one year	(140.3)	(24.6)	(6.4)	(0.5)	(171.8)
Finance leases less than one year	(5.7)	3.6	-	(3.9)	(6.0)
Finance leases more than one year	(10.8)	(8.3)	-	3.9	(15.2)
Net debt	(146.5)	(10.3)	(4.0)	(0.5)	(161.3)

The non cash movement in debt due after one year is the impairment of facility fees relating to the lending facility that was re-financed in May 2008, which was charged to finance costs in the year.

7.    Acquisition of subsidiaries

On 24 June 2008, the Group acquired 100% of the issued share capital of European Study Tours Limited (EST) for cash consideration of £6.2m including directly attributable costs. EST's principal activity is the provision of bespoke educational travel and subject specific conferences for the 16+ age group, higher and further educational students. 

The net assets and results of the acquired business are included in the consolidated accounts of the Group from the date of acquisition. This acquisition has been accounted for using the purchase method of accounting.

	Book value	Provisional fair value adjustments	Provisional fair value
	£m	£m	£m
Net assets acquired
Other intangible assets	-	0.8	0.8
Trade and other receivables	0.5	-	0.5
Cash and cash equivalents	1.4	-	1.4
Trade and other payables	(1.0)	-	(1.0)
Current tax liabilities	(0.2)	-	(0.2)
Deferred tax assets liabilities	-	(0.1)	(0.1)
	0.7	0.7	1.4
Goodwill			4.8
Total consideration			6.2
Satisfied by:
Cash consideration			6.0
Directly attributable costs			0.2
			6.2
Net cash outflow arising on acquisition
Cash consideration and directly attributable costs			(6.2)
Cash and cash equivalents acquired			1.4
			(4.8)

The goodwill arising on acquisition of EST is attributable to an expectation of future growth in the business and anticipated future operating synergies.

The fair value currently established for the above acquisition is considered to be provisional by the Directors as they are finalising their determination. Fair values will be reviewed based upon additional information up to one year from the date of acquisition.

EST contributed £0.5m revenue and a loss of £0.1m to the Group's profit before tax between the date of acquisition and the balance sheet date.

If the acquisition of EST had been completed on the first day of the financial year, Group revenues for the period would have been £463.8m and profit attributable to equity holders would have been £19.0m.

EST is included within the Education segment.

7.    Acquisition of subsidiaries (continued)

On 1 October 2008 the Group acquired 100% of the issued share capital of Select Sites Limited for cash consideration of £0.9m including directly attributable costs. Select Sites is a specialist campsite reservation service offered to UK customers with their own caravan, trailer tent, motor-home or tent. Select Sites is included within the Camping segment.

On 7 December 2007 the Group acquired 100% of the issued share capital of Divantoura BVBA for cash consideration of €0.4m including directly attributable costs. Divantoura BVBA is a Belgian sales agent for Djoser BV. Divantoura BVBA is included within the Adventure segment.

	Book value	Provisional fair value adjustments	Provisional fair value
	£m	£m	£m
Net assets acquired
Property, plant and equipment	0.3	-	0.3
Other intangible assets	0.2	(0.1)	0.1
Trade and other receivables	0.7	-	0.7
Cash and cash equivalents	0.7	-	0.7
Trade and other payables	(1.0)	-	(1.0)
	0.9	(0.1)	0.8
Goodwill			0.4
Total consideration			1.2
Satisfied by:
Cash consideration			1.1
Directly attributable costs			0.1
			1.2
Net cash outflow arising on acquisition
Cash consideration and directly attributable costs			(1.2)
Cash and cash equivalents acquired			0.7
			(0.5)

The goodwill arising on the acquisitions is attributable to an expectation of future growth in the businesses and anticipated future operating synergies.

The fair value currently established for the above acquisitions is considered to be provisional by the Directors as they are finalising their determination. Fair values will be reviewed based upon additional information up to one year from the date of acquisition.

There were no intangible assets identified for which a fair value could not be reliably measured.

  8.     Share capital

	Ordinary shares of 5p each
Group and Company	Number	Nominal  value £m
Authorised:
At beginning of year and end of year	90,000,000	4.5
Allotted, called up and fully paid:
At 1 October 2006	48,601,675	2.4
Allotments in the year	240,482	-
At 1 October 2007	48,842,157	2.4
Allotments in the year	15,109	-
At 30 September 2008	48,857,266	2.4

The Company has one class of ordinary shares, which carry no right to fixed income.

Shareholders' authority for the purchase of up to 4,884,900 of the Company's ordinary shares of 5p each was still valid at the end of the year.

During the year 15,109 (2007: 240,482) ordinary 5p shares were issued, with a nominal value of £755 (2007: £12,024) in respect of options exercised under the Company's share option schemes.

9.    Reserves

	Share premium account	Other reserves	Own Shares	Retained earnings	Total
Group	£m	£m	£m	£m	£m
At 1 October 2006	37.9	0.7	(3.2)	21.3	56.7
Exchange differences on translation of foreign operations	-	-	-	0.6	0.6
Actuarial gains on defined benefit pension schemes	-	-	-	0.1	0.1
Profit for the year	-	-	-	26.2	26.2
Dividends paid	-	-	-	(14.5)	(14.5)
New share issue subscribed	1.0	-	-	-	1.0
Credit to equity for share based payments	-	0.6	-	-	0.6
Disposed of on exercise of options	-	-	0.6	-	0.6
At 30 September 2007	38.9	1.3	(2.6)	33.7	71.3
Exchange differences on translation of foreign operations	-	-	-	(1.9)	(1.9)
Actuarial losses on defined benefit pension schemes	-	-	-	(1.0)	(1.0)
Tax effect of items recognised direct in equity	-	(0.1)	-	0.2	0.1
Profit for the year	-	-	-	18.0	18.0
Dividends paid	-	-	-	(15.7)	(15.7)
Debit to equity for share based payments	-	(0.1)	-	-	(0.1)
At 30 September 2008	38.9	1.1	(2.6)	33.3	70.7

10.     Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

There has been no change to the nature of related party transactions in the financial year that has materially affected the financial position or performance of the Group.

  11.    Non-statutory accounts

The financial information set out above was approved by the Directors on 27 November 2008. It does not constitute the Company's statutory accounts for the years ended 30 September 2008 or 2007, but is derived from these accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

Whilst the financial information included in this full year results announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement in itself does not contain sufficient information to comply with IFRS.

This financial information does not represent the Company's dissemination announcement. The Company expects to publish its full financial statements that comply with IFRS in January 2009.

 

END

 

 

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