Rights Issue

RNS Number : 0228U

Holidaybreak PLC

17 June 2009

 

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF THE INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY HOLIDAYBREAK PLC TODAY IN CONNECTION WITH THE RIGHTS ISSUE. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE.

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

ALL TERMS ARE DEFINED AT THE BACK OF THIS ANNOUNCEMENT, UNLESS OTHERWISE DEFINED HEREIN.

 

Holidaybreak plc announces a fully underwritten Rights Issue

to raise net proceeds of approximately £31.0 million

The Board of Holidaybreak plc ("Holidaybreak") today announces a fully underwritten 4 for 9 Rights Issue by KBC Peel Hunt to raise gross proceeds of approximately £33.2 million (approximately £31.0 million net of expenses) through the issue of 21,714,340 New Ordinary Shares. The Rights Issue is subject to approval by Shareholders at a General Meeting to be held on 3 July 2009.

Highlights

Rights Issue

4 for 9 Rights Issue to raise gross proceeds of approximately £33.2 million (approximately £31.0 million net of expenses), through the issue of 21,714,340 New Ordinary Shares at a price of 153p per share, a 39.9 per cent. discount to the theoretical ex-rights price and 49.0 per cent. discount to the closing price of 299.75p per Ordinary Share on 16 June 2009, the last business day prior to the announcement of the Rights Issue. The Rights Issue has been fully underwritten by KBC Peel Hunt.

Reasons for the Rights Issue

The current economic environment has resulted in various investment opportunities for the Group’s education businesses, for example, sites of former independent private schools and commercial conference centres which have ceased trading. The Board believes that over the last 5 years, the market for privately held education centres has grown at approximately 10 per cent. per annum due in part to a reduction in public sector funding of local education authority centres and a general decline in smaller competitors. PGL services approximately 5,000 UK schools out of a total of over 27,000.

In the Board’s opinion, there are investment opportunities for its education businesses with attractive return profiles, similar to the expected return on invested capital at Windmill Hill. The Board is now in advanced discussions to acquire a large potential PGL outdoor education centre with good access to London. However, a formal agreement regarding the acquisition can only be entered into upon completion of the Rights Issue.

The Board therefore believes that the successful completion of the Rights Issue will enable the Group to take advantage of attractive investment opportunities for its education businesses as they arise, thereby enabling the Group to pursue its strategy for growth at a time when many of its competitors are constrained from doing so. Should the Rights Issue not proceed, the Board believes that future expansion and growth of the Group’s education businesses will be limited for the foreseeable future.

John Coleman, Chairman, said:

“The Board believes that the successful completion of the Rights Issue will enable the Group to take advantage of attractive investment opportunities for its education businesses. In particular, the Board is now in advanced discussions to acquire a large potential PGL outdoor education centre with good access to London. Completion of the Rights Issue will help the Group to pursue its strategy for growth at a time when many of its competitors are constrained from doing so.”

Carl Michel, Group Chief Executive, said:

"There remains no sign of the Group's Education Division being materially impacted by the recession.  The Board believes that there are investment opportunities for its education businesses with attractive return profiles, similar to the expected returns at Windmill Hill. The Rights Issue proceeds will be used to take advantage of such appropriate investment opportunities as they arise.”

Expected timetable of principal events

Each of the times and dates in the table below is indicative only and may be subject to change.

Record Date for entitlements under the Rights Issue	close of business on 30 June 2009
General Meeting	9.00a.m. on 3 July 2009
Despatch of Provisional Allotment Letters (to Qualifying non-CREST Shareholders only)	3 July 2009
Dealings expected to commence in New Ordinary Shares, nil paid, on the London Stock Exchange and Existing Ordinary Shares marked “ex”	8.00a.m. on 6 July 2009
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters	11.00a.m. on 20 July 2009
Dealings in New Ordinary Shares, fully paid, commence on the London Stock Exchange	8.00a.m. on 21 July 2009
Expected date of despatch of definitive certificates for New Ordinary Shares in certificated form	by 28 July 2009

Notes:

(1) References to times in this announcement are to London time unless otherwise stated.

(2) The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement and in the Provisional Allotment Letters may be adjusted by Holidaybreak with the consent of KBC Peel Hunt in which event details of the new times or dates will be notified to the FSA, to the London Stock Exchange and, where appropriate, to Shareholders.

(3) If you have any queries on the procedure for acceptance and payment, you should contact Capita Registrars on 0871 664 0321 or, if telephoning from outside the UK, on [phone]. This helpline is available from 9.00 a.m. to 5.00 p.m., Monday to Friday (except on any bank holiday). Calls to the 0871 664 0321 number are charged at 10 pence per minute (including VAT) plus any of your service provider’s network extras. Calls to the [phone] number from outside the UK are charged at applicable international rates. Different charges may apply to calls made from mobile telephones and calls may be recorded and monitored randomly for security and training purposes. Capita Registrars cannot provide advice on the merits of the Rights Issue nor give any financial, legal or tax advice.

General Meeting

Completion of the Rights Issue is subject to a number of conditions, including Shareholder approval being obtained at the General Meeting.

Documentation

A Prospectus (including a circular to Shareholders) will be published and sent to Shareholders today containing full details of the Rights Issue. The Prospectus will be available, free of charge, at Holidaybreak’s registered office at Hartford Manor, Greenbank Lane, Northwich, Cheshire CW8 1HW, and on its website www.holidaybreak.co.uk.

The above highlights should be read in conjunction with the full text of this announcement.

ENQUIRIES

Holidaybreak plc	[phone]
John Coleman, Chairman
Carl Michel, Group Chief Executive
Bob Baddeley, Group Finance Director
KBC Peel Hunt	[phone]
Garry Levin
Matt Tyler
Matt Goode
Oliver Stratton
Brunswick	[phone]
Catherine Hicks
Craig Breheny

If you have questions, please telephone the Shareholder helpline on the numbers set out below. This Shareholder helpline is available from 9:00a.m. to 5:00p.m. Monday to Friday except on any bank holiday.  Calls to the 0871 664 0321 number are charged at 10 pence per minute (including VAT) from a UK landline plus any of your service provider’s network extras. Calls to the [phone] number from outside the UK are charged at applicable international rates. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes.

Shareholder helpline telephone numbers:

0871 664 0321 (inside the UK) or ([phone] (outside the UK)

Please note that, for legal reasons, the Shareholder helpline is only able to provide information contained in the Prospectus and information relating to the Company's register of members and is unable to give advice on the merits of the Rights Issue or provide financial, tax or investment advice.

This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any Nil Paid Rights, Fully Paid Rights or New Ordinary Shares referred to in this announcement except on the basis of information in the prospectus which is expected to be published by the Company today in connection with the Rights Issue (“Prospectus”). This announcement does not constitute, or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in the capital of the Company in any jurisdiction. Any decision to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any Provisional Allotment Letter, Nil Paid Rights, Fully Paid Rights and/or New Ordinary Shares should only be made on the basis of information contained in and incorporated by reference into the Prospectus which contains further details relating to the Company in general as well as a summary of the risk factors to which an investment in the New Ordinary Shares is subject. Nothing in this announcement should be interpreted as a term or condition of the Rights Issue. Subject to certain exceptions, the Prospectus will not be available to Shareholders located in Restricted Jurisdictions. This announcement is not directed to, or intended for distribution or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability, or use would be contrary to law or regulation which would require any registration or licensing within such jurisdiction.

 

This announcement and the information contained herein is not an offer of securities for sale in the United States. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares and the Provisional Allotment Letters may not be offered or sold in the United States or to or for the account or benefit of a person located in the United States absent registration under the US Securities Act of 1933, as amended or an exemption from, or in a transaction not subject to, registration. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares and the Provisional Allotment Letters have not been and will not be registered under the US Securities Act of 1933, as amended, or with any securities regulatory authority of any state or jurisdiction of the United States and no public offering of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares or the Provisional Allotment Letters will be made in the United States. No money, securities or other consideration from any person inside the United States is being solicited and, if sent in response to the information contained in this announcement, will not be accepted. 

 

This announcement does not constitute an offer of Nil Paid Rights, Fully Paid Rights, New Ordinary Shares or Provisional Allotment Letters to any person with a registered address in, or who is resident in, Canada, Japan, Australia or the Republic of South Africa. None of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares or the Provisional Allotment Letters has been or will be registered under the relevant laws of any state, province or territory of Canada, Japan, Australia or the Republic of South Africa. Subject to certain limited exceptions, neither the Prospectus, the Provisional Allotment Letter nor this announcement will be distributed in or into Canada, Japan, Australia or the Republic of South Africa. 

 

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

 

KBC Peel Hunt, which is authorised and regulated by the FSA in the United Kingdom, is acting exclusively for the Company and for no-one else in connection with the Rights Issue and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Rights Issue and, subject to applicable laws and regulations, will not be responsible to anyone other than the Company for providing the protections afforded to any client of KBC Peel Hunt, or for advising any such person (other than the Company) in connection with the contents of this announcement or in connection with any transaction referred to in this announcement.

 

KBC Peel Hunt may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the Nil Paid Rights, the Fully Paid Rights or the New Ordinary Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure (if any) or otherwise. Except as required by applicable law or regulation, KBC Peel Hunt does not propose to make any public disclosure in relation to such transactions.

 

This announcement contains forward-looking statements that involve risks, uncertainties and assumptions. The Group’s actual results may differ materially from those anticipated in these forward-looking statements as a result of factors including, but not limited to, those to be set forth in the Prospectus. These forward-looking statements reflect the Company’s judgment at the date of this announcement and are not intended to give any assurances as to future results. The Company undertakes no obligation to update any forward-looking statements contained in this announcement, and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this announcement save as required by law, any regulatory authority, the Prospectus Rules, the Listing Rules or the Disclosure and Transparency Rules.

 

No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published earnings per Ordinary Share. Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.

 

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

This announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. 

Holidaybreak plc

Fully underwritten Rights Issue to raise net proceeds of approximately £31.0 million

Introduction

The Board of Holidaybreak today announces a fully underwritten rights issue to raise gross proceeds of approximately £33.2 million (approximately £31.0 million net of expenses). The issue is being made on the basis of 4 New Ordinary Shares for every 9 Existing Ordinary Shares at an issue price of 153p per New Ordinary Share. This represents a discount of approximately 39.9 per cent. to the theoretical ex-rights price and a 49.0 per cent. discount to the closing price of 299.75p per New Ordinary Share on 16 June 2009, being the last business day before the announcement of the Rights Issue. The Rights Issue has been fully underwritten by KBC Peel Hunt.

A Prospectus (containing a circular to Shareholders) will be published and sent to Shareholders today. The Prospectus will contain the expected timetable for the Rights Issue. Holidaybreak will seek approval from its Shareholders in respect of the Rights Issue at a General Meeting expected to be held on 3 July 2009.

The Directors are fully supportive of the Rights Issue and each intends, to the extent that he is able, either to take up his rights in full under the Rights Issue or to sell sufficient of his Nil Paid Rights during the nil paid dealing period to meet the costs of taking up the balance of his entitlements to New Ordinary Shares under the Rights Issue.

Background

Economic backdrop

The Board believes the diversity of Holidaybreak’s four operating divisions provides some resilience to the current global recession. However the general economic environment is much more challenging than in any previous period of the Company’s history and the outlook for the global travel sector appears challenging.

According to the UK Government’s Office for National Statistics, the average UK employment rate was 7.1 per cent. for the three months to 31 March 2009, up 0.8 per cent. over the previous quarter and up 1.8 per cent. from 31 March 2008. The number of unemployed people in the UK increased by 244,000 over three months to 31 March 2009 and by 592,000 since 31 March 2008, to reach 2.22 million. This unemployment level and rate of increase are the highest since 1981. The level of redundancies for the three months to 31 January 2009 was 286,000, up 27,000 over the quarter and up 175,000 since 31 March 2008. This is the highest figure since comparable records began in 1995. (Source: UK Government Office for National Statistics)

The UK household savings ratio increased from 1.6 per cent. in the three months to 31 December 2007 to 4.8 per cent. in the three months to 31 December 2008. (Source: UK Government Office for National Statistics).

During the same period, the value of sterling against global currencies, in particular the euro and US dollar, fell dramatically, from £1:€1.2566 and £1:US$1.9866 as at 31 March 2008 to £1:€1.1275 and £1:US$1.4299 as at 31 March 2009. (Source: Bloomberg)

The combination of rising unemployment and increasing household savings rate has meant that the discretionary incomes of UK consumers (who make up the majority of Holidaybreak’s customers) have reduced. Additionally, the decline in the value of sterling against global currencies, in particular the euro and US dollar, has had a consequential impact on the overall cost of overseas holidays for UK consumers which, alongside the reduction in the availability of debt has meant that their purchasing power has been severely eroded.

Holidaybreak’s response to the deterioration of general economic conditions

The impact of a reduction in demand in the Hotel Breaks and Adventure Travel Divisions has had a consequential impact on the Group’s trading performance over the last twelve months.

To address the difficult trading conditions in this challenging environment the Board has taken action, and has proposed further steps, to reduce the Group’s cost base, maximise cash generation and reduce the impact of currency volatility on the balance sheet, including:

·         making staff reductions in the autumn of 2008 at Superbreak (42 employees or 17 per cent. of the workforce) and Explore (20 employees or 13 per cent. of the workforce). In aggregate the annualised cost savings resulting from these headcount reductions is expected to total £1.7 million, with a restructuring cost of £0.3 million for the current financial year;

·         reducing the level of capital expenditure in the Camping Division for the current financial year where only 442 mobile-homes have been replaced (with a further 450 from a proposed 950 being refurbished). This has allowed capacity to be held broadly constant but has resulted in the average age of the fleet increasing to 5.6 years. The saving in capital expenditure over a normal level of replacement was approximately £5 million. Furthermore, terms were agreed at the outset with the manufacturers of replacement mobile-homes for payment to be made in line with the substantial receipts from customers in June 2009;

·         reducing the level of capital expenditure in the Education Division by £4 million by deferring a number of remedial projects at the UK centres and concentrating spend entirely on projects to increase the revenue generating bedstock by 10 per cent.;

·         restructuring of certain of the Group’s operations. The Group has closed offices in Cambridge in the Education Division and near Zürich in the Camping Division. This has reduced headcount by 68, and led to restructuring charges of £2 million in the year ended 30 September 2008, but has resulted in annualised cost savings of £1.1 million;

·         slimming down the management structure including the elimination of the role of managing director of the Adventure Travel Division;

·         sub-inflation salary increases (including salary freezes) across the Group in 2009, except where increases are required by law (e.g. minimum wage legislation);

·         suspending the expansion of TravelWorks into other markets and eliminating a proposed marketing campaign at Bookit saving a combined £0.5 million;

·         reducing the total dividend for the year ended 30 September 2008, resulting in an annualised cash saving of approximately £7.7 million;

·         suspending any further acquisitions since July 2008; and

·         successfully applying for ABTA membership with appropriate level of customer protection for Superbreak’s UK packaged business. This enables the release of cash from customers previously held in trust pending customer departure (ranging from £5.9 million to £6.5 million over the last 12 months).

The Board continues to review opportunities to improve efficiencies and reduce costs across all its businesses which may include:

·         headcount reductions;

·         salary freezes;

·         further reduction in discretionary revenue and capital expenditure; and

·         sale of non-core assets.

Reasons for the Rights Issue

Whilst the deterioration of general economic conditions has led to a reduction in demand in the Hotel Breaks and Adventure Travel Divisions, the Education Division has continued to perform resiliently and there remains no sign of the division being materially impacted by the recession. The Group’s education businesses are less exposed to discretionary consumer spending and also enjoy strong forward booking visibility with growing margins; hence any acquisitive growth is expected to be within our education businesses which will continue to be the key driver of growth for the Group in the medium term.

The Education Division was formed through the acquisitions of PGL (acquired for a total consideration (including costs) of £97.6 million in June 2007) and NST (acquired for a total consideration (including costs) of £39.6 million in October 2007). In April 2008, PGL acquired a site at Windmill Hill in Sussex which opened on 15 May 2009. The site was acquired for £2.5 million and the Group invested a further £4.5 million to create a 428 bed facility. The facility is fully booked for the 2009 season and, as at 15 June 2009, was 80 per cent. booked for 2010. The Directors believe Windmill Hill should achieve a return on invested capital substantially in excess of the Group’s cost of capital. PGL’s UK outdoor education centre capacity now stands at approximately 7,000 beds and, in the Board’s opinion, has the potential to increase its UK bed stock by between 5 - 10 per cent. per annum.

The current economic environment has resulted in various investment opportunities for the Group’s education businesses, for example sites of former independent private schools and commercial conference centres which have ceased trading. The Board believes that over the last 5 years, the market for privately held education centres has grown at approximately 10 per cent. per annum due in part to a reduction in public sector funding of local education authority centres and a general decline in smaller competitors. PGL services approximately 5,000 UK schools out of a total of over 27,000.

In the Board’s opinion, there are investment opportunities for our education businesses with attractive return profiles, similar to the expected return on invested capital at Windmill Hill. The Board is now in advanced discussions to acquire a large potential PGL outdoor education centre with good access to London. The site is situated in a large area of parkland and currently comprises a large number of meeting and conference rooms, lecture theatres, en-suite bedrooms, an outdoor activity field and lakes. However, a formal agreement regarding the acquisition can only be entered into upon completion of the Rights Issue.

Going forward, the Board will continue its programme of cost savings and efficiency improvements in order to manage the Group as efficiently as possible during the current economic downturn. However, with the expansion capital provided through the Rights Issue, the Group will be well positioned to capitalise on appropriate investment opportunities for our education businesses and to act quickly to take advantage of such opportunities as they arise. Should the Rights Issue not proceed, the Board believes that future expansion and growth of the Group’s education businesses will be constrained for the foreseeable future.

Use of proceeds

The Rights Issue will result in an increase in cash available to the Group of approximately £31 million (net of expenses) which will be used to take advantage of appropriate investment opportunities in the Group’s education businesses, including the opportunity outlined above, as they arise. In the meantime, and pending formal agreements to make such investments, the Group expects that it will initially use the net proceeds of the Rights Issue to reduce the level of drawn borrowings under the Group’s revolving credit facility. The Group will redraw the net proceeds of the Rights Issue to fund the investment opportunities described above at the appropriate time.

Summary of the principal terms of the Rights Issue

The Company will offer 21,714,340 New Ordinary Shares, in aggregate, by way of rights to Qualifying Shareholders at 153p per New Ordinary Share payable in full on acceptance, on the basis of:

4 New Ordinary Shares for every 9 Existing Ordinary Shares

held by Qualifying Shareholders on the Record Date. The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, after the date of the Prospectus. For the avoidance of doubt, the New Ordinary Shares will not be issued with the right to receive the 2009 interim dividend declared on 26 May 2009 to shareholders on the register on 17 July 2009.

The Rights Issue is fully underwritten and is conditional upon, among other things:

(a)       the passing of the Resolutions without amendment;

(b)       the Underwriting Agreement not having been terminated in accordance with its terms prior to Admission; and

(c)       admission of the New Ordinary Shares, nil paid, becoming effective by 9.00 a.m. on 6 July 2009 (or such later time and/or date as KBC Peel Hunt may determine (in its absolute discretion), being not later than 8.00 a.m. on 31 August 2009).

It is expected that the Nil Paid Rights and the Fully Paid Rights will be enabled for settlement in, and admitted to, CREST on 6 July 2009. It is expected that Provisional Allotment Letters in respect of the New Ordinary Shares will be posted to Qualifying non-CREST Shareholders following the General Meeting to be held on 3 July 2009 and that Admission will become effective and dealings in the Nil Paid Rights will commence on the London Stock Exchange at 8.00 a.m. on 6 July 2009.

The latest time and date for acceptance and payment in full under the Rights Issue is expected to be 11.00 a.m. on 20 July 2009.

Current trading and prospects

The Group has traditionally reported an operating loss in the first half due to the seasonal nature of its Camping and Education businesses. In the six month period to 31 March 2009, Holidaybreak recorded a pre-tax loss on ordinary activities of £36.6 million (2008: loss of £18.2 million). The underlying loss before impairment of goodwill, exceptional restructuring costs, amortisation of acquired intangible assets and IAS 39 revaluations of interest rate derivatives and forward currency exchange contracts was £18.1 million (2008: loss of £14.9 million).

As at 15 June 2009, the Education Division was 96 per cent. booked for 2009 and 39 per cent. for 2010. Sales intake is currently 7 per cent. above last year’s comparative on a like-for-like basis. The new 428 bed facility at Windmill Hill in Sussex opened on time and on budget on 15 May 2009. 

As at 15 June 2009, sales intake for the current year at Hotel Breaks was 5 per cent. below last year. The division has taken out about £1 million of costs in the current year at Superbreak, primarily through headcount reduction in the call centre. Trading is improving as the division begins to see improved supplier offers (lower room rates and train fares) coupled with better availability. It is also benefiting from an improved London show line-up compared to 2008: Oliver!, which opened in January, has sold well and has also led to increased demand for other established shows such as Wicked, The Lion King and Billy Elliot.

As at 15 June 2009, sales intake for the Adventure Travel Division was up 4 per cent. year-on-year (down 4 per cent. at constant exchange rates). Demand for adventure trips has been adversely affected by higher prices due to the weakness of sterling, although certain softer-currency destinations, such as Turkey, are performing reasonably well. A £1 million cost saving programme has been implemented and a further restructuring of Explore will take place in the coming months to ensure the business can trade profitably at lower volumes. Due to the adverse trading performance, it has been decided to partially impair Explore’s residual goodwill by £9.6 million.

As at 15 June 2009, Camping sales were level with last year in the context of a 4 per cent. reduction in capacity and the division was over 90 per cent. booked for the whole season, in line with Holidaybreak’s expectations and compared with 91 per cent. last year, highlighting the later booking trend. Yields continue to remain strong and in line with target.

Current trading is in line with management expectations. However, the Group faces a number of risks and uncertainties, further details of which are set out in Part 2 (Risk factors) of the Prospectus. Holidaybreak will remain focused on keeping costs under control while developing growth opportunities for the short and medium term.

Despite the unfavourable short-term trading outlook, the Directors believe that the Group remains well positioned in the medium to longer term once GDP and consumer spending growth returns to the UK and the Group’s key European markets. The markets in which the Group operates are typically fragmented, with a few large players and a significant portion of the market supplied by small local operators. In the shorter term, the Directors believe the pressure on margins and cash flow favours the larger and better capitalised businesses, which are expected to gain market share from weaker competitors.

The Directors believe that there are exciting opportunities for organic and acquisitive growth, in particular in Holidaybreak’s Education Division, which they believe will lead to significant value creation for the Group and its Shareholders. PGL opened a new 428 bed facility at Windmill Hill in Sussex on 15 May 2009 operating at full capacity, after a total investment of £7 million. In addition the Board believes opportunities will be forthcoming to acquire additional sites for PGL as a result of forced sales due to the impact of the economic downturn. The Education Division is less exposed to discretionary consumer spending and also enjoys strong forward booking visibility. For example, as at 15 June 2009, revenue for the core PGL outdoor education centres is 12 per cent. ahead of last year and is growing at 8 per cent. for 2010.

The Board anticipate that the trend for accretive new investment or acquisition opportunities will increase over the rest of this financial year and beyond, and is looking at how best to take advantage of these opportunities.

General Meeting

Shareholders will today be sent the Prospectus convening a General Meeting of the Company to be held at 9.00 a.m. on 3 July 2009 at the offices of KBC Peel Hunt, 111 Old Broad Street, London EC2N 1PH. A Form of Proxy will be enclosed with the Prospectus. The General Meeting is being held for the purpose of considering and, if thought fit, passing the following three Resolutions:

(i)         The first resolution is an ordinary resolution to increase the Company's authorised, but unissued, share capital;

(ii)        The second resolution is conditional upon the passing of the first resolution above and is an ordinary resolution to grant the Directors authority to allot up to 21,714,340 New Ordinary Shares for the purpose of the Rights Issue; and

(iii)       The third resolution, conditional upon the passing of the first and second resolution above, is a special resolution, to disapply the pre-emptive rights provisions of section 89 of the Companies Act 1985 in respect of up to 21,714,340 New Ordinary Shares to be allotted pursuant to the second resolution above.

To be effective, Forms of Proxy must be completed and received by the Registrars at Capita Registrars, Proxy Department, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by 9.00a.m. on 1 July 2009.

Action to be taken

Further information on the Rights Issue and the procedure for acceptance and payment and the procedure in respect of rights not taken up will be set out in the Prospectus.

Recommendation

The Board has received financial advice from KBC Peel Hunt in relation to the Rights Issue. In providing advice to the Board, KBC Peel Hunt has relied upon the Board’s commercial assessment of the Rights Issue. The Board considers the Rights Issue and the Resolutions to be proposed at the General Meeting of the Company to be in the best interests of the Company and its Shareholders as a whole. Accordingly the Board unanimously recommends that Shareholders vote in favour of the Resolutions set out in the notice of General Meeting to be sent to Shareholders, as they intend to do in respect of their own beneficial holdings which amount to 150,809 Ordinary Shares (representing 0.31 per cent. of the existing issued ordinary share capital of the Company as at 16 June 2009, the last practicable day prior to this announcement).

DEFINITIONS

 

The following definitions apply throughout this announcement, unless the context otherwise requires:

“Admission”	admission to listing on the Official List together with admission to trading on the London Stock Exchange’s main market for listed securities
“Board” or “Directors”	the board of directors of the Company
“Brunswick”	Brunswick Group LLP
“Business Day”	any day (excluding Saturdays and Sundays) on which banks are open in London for normal banking business
“Camping Division”	the Group’s camping division
“Capita”, “Capita Registrars” or “Registrars”	Capita Registrars Limited, operating under its trading name, Capita Registrars
“certificated” or “in certificated form”	not in uncertificated form (that is, not in CREST)
“Company” or “Holidaybreak”	Holidaybreak plc
“CREST”	the computerised settlement system operated by Euroclear which facilitates the transfer of shares
“Disclosure and Transparency Rules”	the disclosure and transparency rules issued by the FSA
“Education Division”	the Group’s education division
“euro” or “€”	the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the Treaty establishing the European Community, as amended
“Existing Facilities”	the Group’s £265 million facility pursuant to a credit agreement dated 9 May 2008 and a further supplemental agreement dated 26 November 2008 between among others Holidaybreak and its subsidiaries, Barclays Bank PLC and The Royal Bank of Scotland plc
“Existing Ordinary Shares”	the Ordinary Shares in issue as at the date of the Prospectus
“Form of Proxy”	the form of proxy for use by Shareholders in connection with the General Meeting
“FSA”	the Financial Services Authority, acting in its capacity as the competent authority in the United Kingdom pursuant to Part VI of FSMA
“FSMA”	the Financial Services and Markets Act 2000, as amended
“Fully Paid Rights”	rights to acquire New Ordinary Shares, fully paid
“General Meeting” or “GM”	the General Meeting of the Company to be held on 3 July 2009, notice of which is set out at the end of the Prospectus
“Group”	the Company and its subsidiary undertakings as defined in section 258 of the 1985 Act
“Hotel Breaks Division”	the Group’s hotel breaks division
“IFRS”	International Financial Reporting Standards as adopted by the Council of the European Union
“London Stock Exchange”	London Stock Exchange plc
“Listing Rules”	the listing rules issued by the FSA
“New Ordinary Shares”	21,714,340 new Ordinary Shares to be issued pursuant to the Rights Issue
“Nil Paid Rights”	New Ordinary Shares in nil paid form provisionally allotted to Qualifying Shareholders pursuant to the Rights Issue
“NST”	NST Travel Group Limited, a company incorporated in England and Wales with registered number 02665024, which operates under trading name “NST”
“Ordinary Shares”	Ordinary shares of £0.05 each in the capital of the Company, ISIN no. GB0003164950
“PGL”	PGL Travel Limited, a company incorporated in England and Wales with registered number 1191534, which operates under the trading name “PGL”
“Prospectus”	the prospectus dated 17 June 2009 issued in connection with an issue of 21,714,340 New Ordinary Shares by way of rights
“Prospectus Rules”	the prospectus rules issued by the FSA
“Provisional Allotment Letter”	the renounceable provisional allotment letter dispatched to Qualifying Shareholders (subject to certain exceptions) pursuant to the Rights Issue
“Qualifying CREST Shareholders”	Qualifying Shareholders whose Ordinary Shares on the register of members of the Company on the Record Date are in uncertificated form
“Qualifying non-CREST Shareholders”	Qualifying Shareholders whose Ordinary Shares on the register of members of the Company on the Record Date are in certificated form
“Qualifying Shareholders”	holders of Ordinary Shares on the register of members of the Company on the Record Date
“Record Date”	the close of business on 30 June 2009
“Resolutions”	the resolutions set out in the notice of the General Meeting which is set out at the end of the Prospectus
“Restricted Jurisdiction”	the United States, Canada, Japan, Australia or the Republic of South Africa and any other jurisdiction outside the UK in which it would be unlawful or in contravention of certain regulations to offer the Nil Paid Rights, Fully Paid Rights or New Ordinary Shares under the Rights Issue
“Rights Issue”	the proposed issue by way of rights of New Ordinary Shares to Qualifying Shareholders as described in this announcement
“Rights Issue Price”	153p per New Ordinary Share
“Shareholders”	holders of Ordinary Shares
“Sponsor” or “KBC Peel Hunt”	KBC Peel Hunt Ltd
“Sterling” or “£”	the lawful currency of the United Kingdom
“Superbreak”	the trading name of Superbreak Mini-Holidays Limited, a company incorporated in England and Wales with registered number 01674187
“uncertificated” or “in uncertificated form”	recorded on the relevant register of Ordinary Shares as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
“Underwriting Agreement”	the agreement dated 17 June 2009 between the Company and KBC Peel Hunt, details of which are set out in the Prospectus
“United Kingdom” or “UK”	the United Kingdom of Great Britain and Northern Ireland
“United States” or “US”	the United States of America
“US$”	the lawful currency of the United States
“VAT”	value added tax
“Windmill Hill”	the PGL outdoor education centre at Windmill Hill, near Hailsham, East Sussex

 

 

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