Preliminary Results
Holidaybreak PLC
02 December 2004
2 December 2004: For immediate release
HOLIDAYBREAK PLC
Results for the Year to 30 September 2004
Holidaybreak, the UK's leading operator of specialist holiday businesses,
announces preliminary results for year to 30 September 2004.
2004 2003
£m £m
Group Turnover 281.6 259.5
Operating profit* 31.4 31.8
Operating margins* 11.1% 12.2%
Profit before tax* 28.0 27.9
Statutory Profit before Tax 17.4 20.7
Exceptional operating costs** 2.6 3.1
Headline EPS* 44.0p 44.4p
Net debt 12.5 23.3
Dividend per share 24.2p 22.0p
* Before goodwill amortisation (£2.7m) and impairment (£5.3m) and exceptional
costs (£2.6m)
** Reorganisation within Camping
Summary
• UK's leading operator of specialist holiday businesses. 2.3m holidays
sold in the year (2003: 2.0m).
• Management focused on maximising yields and optimising distribution,
particularly through the internet, which accounts for around 20% of
Group sales and continues to grow rapidly.
• Results in line with market expectations. A resilient performance
overall, in a rapidly changing market environment, with excellent
results from the Hotel Breaks and Adventure divisions.
• 2004 sales up 8.5% at £281.6m (Hotel Breaks:+24%; Adventure:+12%,
Camping: - 4%)
• £10.8m of net cash generated
• Dividend up 10%, reflecting the Board's confidence in future
prospects.
• In the current year, Group sales to date 8% up on 2004. Sales for
Hotel Breaks currently +10%, boosted by the launch of new, hit theatre
shows, Mary Poppins and The Producers, in London. The Adventure
division +34%, reflecting the growing popularity of 'soft adventure'
holidays.
• Camping restructured, capacity cut, costs down. Targeting improved
occupancy rates for 2005, good profits, strong cash flows and
attractive margins. Launching a new internet site, ugogo.com, aimed at
driving low season sales.
Richard Atkinson, Chief Executive, said: "These results meet market
expectations, reflecting a strong performance by both the Hotel Breaks and
Adventure divisions. The issues affecting Camping have been robustly addressed
and we are targeting an improved performance in 2005. In our other businesses,
we see opportunities for further growth, utilising the financial strength of the
Group to grow its portfolio of brands organically and by acquisition, to exploit
market trends."
"Trading for 2005 has started broadly in line with management expectations.
Overall sales for the Group are 8% up compared to the same point in 2004. We aim
to achieve attractive margin performance, a good trading result and further cash
generation."
Enquiries:
Richard Atkinson / Robert Baddeley Holidaybreak
2 December +44 (0) 20 7404 5959
Thereafter +44 (0) 1606 787100
James Hogan / Craig Breheny Brunswick
+44 (0)20 7404 5959
Note to Editors
Holidaybreak (HBR.L) is listed on the London stock market. The UK's leading
operator of specialist holiday businesses, it has three operating divisions:
Hotel Breaks, Adventure Holidays and Camping. Each is a market leader in its
respective specialist sector of the holiday industry, has multi-channel
distribution and is recognised for providing high standards of product and
service quality.
For more information, please go to www.holidaybreak.co.uk.
CHAIRMAN'S STATEMENT
Introduction
Holidaybreak is the UK's leading operator of specialist holiday businesses. In
the year to 30 September 2004, we sold 2.3m holidays (2003:2.0m), increased
headline profits*** and significantly reduced borrowings.
These results are in line with market expectations and reflect a very strong
performance by both our Hotel Breaks and Adventure divisions. The Board will
oversee the continued growth of these businesses in a manner consistent with the
Group's core financial criteria - healthy margins, good return on investment and
the generation of cash. The issues facing Camping are being addressed and
performance will be monitored closely. Camping is an important part of the
Holidaybreak Group, delivering good margins and generating cash.
Once again our employees have displayed commitment, enthusiasm and skill in all
parts of the business. I thank them all for what they have done in 2004.
The 10% increase in the annual dividend reflects the Board's confidence in
future prospects. We are financially strong and have a clear strategy to grow,
both organically and by bolt-on acquisition, adapting to and exploiting the
rapidly changing market place. Management is concentrating on maximising
distribution, cost control, cash generation and margin optimisation. The Board
remains focused on the delivery of shareholder value in the short, medium and
long term.
Group results
For the year to 30 September 2004, pre-tax profits (before goodwill and
exceptional items) were £28.0m (2003: £27.9m) on turnover of £281.6m (2003:
£259.5m). Headline earnings per share*** were 44.0p (2003: 44.4p).
As previously announced, there were exceptional costs of £2.6m, relating to
reorganisation within Camping.
Year-end net debt was reduced by £10.8m to £12.5m after another year of strong
cash generation.
Dividend
The Board is recommending a final dividend of 17.6p, payable on 19 April 2005,
to shareholders on the register on 25 March 2005, making a total of 24.2 p for
the year.
The Board intends to continue to pay ordinary dividends that are appropriate in
the light of the growth prospects and the underlying performance of the Group.
Divisional performance
Hotel Breaks
Holidaybreak sold 1.7m hotel breaks in 2004 (2003:1.45m). We are the principal
provider of domestic leisure breaks for the UK high street travel agencies
whilst growing internet sales rapidly. We also have a growing overseas breaks
programme that represented 7% of 2004 turnover.
Hotel Breaks division turnover increased by 24% to £120.9m (2003: £97.8m).
Operating profit* was up by 32% to £14.5m (2003: £11.0m) and margins improved to
12.0% (2003: 11.3%). The division contributed £16.9m in net cash** (2003:
£13.8m). Hotel Breaks is the principal driver of the Group's strong cash
generation due to its very limited capital expenditure requirements and the
positive cash flows generated by the business model.
The Hotel Breaks division works in partnership with 140 hotel groups in the UK
and many more overseas. We bring them efficient, cost effective distribution at
attractive yields. We will reinforce and build on these relationships whilst
avoiding fixed commitments and guarantees.
Adventure
The Adventure division consists of two businesses, Explore Worldwide and
RegalDive. Holidaybreak sold 41,000 adventure and diving holidays in 2004 (2003:
37,400).
The division recovered strongly after two years that were adversely impacted by
geopolitical events. Turnover increased by 12% to £37.4 m (2003: £33.3m).
Operating profit* was up by 65% to £3.2m (2003: £1.9m) and margins improved to
8.4% (2003: 5.7%). The division contributed £2.8m in net cash** (2003: £2.2m).
Explore is the UK market leader in the 'soft' adventure sector. It now offers a
range of cycling, walking and trekking, adventure short breaks and family
adventures in addition to the core worldwide tours programme. These new products
will allow it to exploit a growing demand for this type of holiday.
RegalDive is the UK's leading dive tour operator. It is an important component
of our consumer offer in this division and enjoyed a strong performance in 2004.
It contributed 15% of divisional sales and 11% of operating profit.
Camping
Holidaybreak sold 570,000 European camping and mobile-home holidays in 2004
(2003: 580,000). Our main brands, Eurocamp and Keycamp, are market leaders.
Turnover in Camping was £123.2 m (2003: £128.4m). Operating profit* was £13.7m
(2003: £18.9m). Margins were 11.1% (2003: 14.7%). The division contributed £8.9m
in net cash** (2003: £9.8m). An impairment review of the Eurosites acquisition
has been carried out. This has resulted in a goodwill impairment charge of
£5.3m.
In April, we highlighted the problem of weak sales in Camping. As well as lower
volumes, profitability was adversely affected by a mismatch between customer
demand levels and capacity, exacerbated by a major shift in regional demand
patterns. For 2005, the division has been reorganised, cost savings effected and
campsite capacity reduced. Capital expenditure for the division will be lower at
£5.6m (2004: 12.8m), net of mobile-home disposal proceeds.
This month, we will be launching a new internet site, ugogo.com, aimed at
driving low season sales. This will be a 'no frills' product, targeting the off
peak market. It represents part of our push to improve occupancy rates whilst
protecting our premium brands and high season prices.
Camping remains profitable and cash generative with healthy, double-digit
margins. It will continue to be managed carefully, with a strong focus on
capacity utilisation and margins.
Board and Management
Matthew Cheetham succeeded Jim Crew as Managing Director of Camping whose
retirement was announced in November 2003. Matthew, who joined Holidaybreak from
MyTravel Group plc on 26 January 2004, was appointed to the Board on 10 February
2004. Jim Crew stepped down from the Board on that date. We thank Jim for his
contribution to the company since he joined in 1989 and wish him well in the
future.
In September, we announced the senior Camping division appointments of Deborah
Beckett and Robin Parry, who are responsible for pan-European marketing and
sales for the Eurocamp and Keycamp brands respectively. All members of the top
team are now based in the divisional head office in Northwich, Cheshire,
following the decision, also announced in September, to close Keycamp's sales
and marketing office in Sutton, Surrey. This has now been successfully
implemented.
Sally Martin joined the Board as a non-executive director on 16 July 2004. Sally
was a Director of Qantas Holidays plc between 2000 and 2003. We anticipate
making a further non-executive appointment in the near future, to replace Clive
Mclintock, who has served Holidaybreak in this capacity since August 1999 and
will retire from the Board at the end of the year. We thank him for his valuable
service both as non-executive director and Chairman of the Remuneration
Committee. Sally Martin will succeed Clive as Chair of the Remuneration
Committee.
Outlook
We are at a fairly early stage in the season and initial trading indicators
should to be seen in that context. To date, trading for 2005 has been in line
with management expectations. Overall sales for the Group are 8% higher than at
the same point in 2004. Sales for Hotel Breaks are 10% up whilst Adventure has
started very strongly and is 34% ahead. These figures reflect continuing
consumer trends towards short-break and specialist holidays.
In the current year, Camping will continue to generate cash and profits at good
margins. Sales to date are 5% lower than last year's equivalent but this should
be seen in the context of an 11% reduction in capacity, as the management
focuses on building occupancy rates and meeting their financial targets.
The Board remains committed to growing shareholder value. It believes this can
currently best be achieved by actively growing the business, both organically
and by acquisition.
Holidaybreak is the UK's leading operator of specialist holidays and a market
leader in the sectors in which it operates. Trading for 2005 has started broadly
in line with management expectations. We aim to achieve attractive margin
performance, a good trading result and further cash generation.
Robert Ayling
Chairman
* Operating profit stated before goodwill amortisation and impairment and
exceptional operating costs.
** Net cash defined as operating cash flow after capital expenditure net of
disposals
*** Headline profits and earnings per share are stated before goodwill
amortisation and impairment of £8.0m and exceptional costs of £2.6m.
FINANCE DIRECTOR'S REVIEW
In the year to 30 September 2004 Holidaybreak plc increased headline profits
before tax* to £28.0m and reduced net debt by £10.8m to £12.5m as we continued
to benefit from substantial cash generation in all businesses. Our strong cash
flow capability is expected to enable the Group to continue to build interest
cover and pay down debt.
GROUP PROFIT AND LOSS ACCOUNT
Turnover in 2004 was up 8.5% on 2003 at £281.6m (2003: £259.5m). Operating
profit before goodwill amortisation and impairment and exceptional costs was
marginally lower than 2003 at £31.4m. Headline earnings per share* were 44.0p
(2003:44.4p).
The Group's net interest charge fell from £3.9m in 2003 to £3.3m. Interest cover
* increased from 8.2 times in 2003 to 9.4 times in 2004.
The tax charge, including full provision for deferred tax, was £5.0m and the tax
rate of 28.8% was lower than 2003 (29.5%).
The proposed final dividend of 17.6 p per ordinary share represents an increase
of 10% over 2003 and gives a total dividend for the year of 24.2p per ordinary
share (2003: 22.0p). Dividend cover is 1.8 times.
EXCEPTIONAL OPERATING COSTS
During the year Camping incurred exceptional operating costs of £2.6m. Of these,
£1.6m relates to the relocation of the Keycamp sales and marketing operations,
including the closure of the Sutton office, and £1.0m to the re-organisation of
overseas operations and marketing, including the division's executive management
structure.
GOODWILL IMPAIRMENT
The Board has reviewed the carrying value of goodwill arising from the
acquisition of Eurosites in 2002 and, as a result, a partial impairment charge
of £5.3m has been made in these accounts. The remaining goodwill on the balance
sheet in respect of Eurosites is £9.2m.
BALANCE SHEET
Net assets of the Group increased to £36.5m (2003 restated: £35.2m). The Balance
Sheet at 30 September 2003 has been restated to reflect the adoption of UITF 38
"Accounting for ESOP Trusts". Net debt gearing at 30 September 2004 was 34.3%
compared to 66.3% at the previous year-end.
Included in other debtors are amounts receivable in respect of VAT recoverable
from the Spanish and Italian tax authorities of €3.5m (£2.4m). These originated
from an internal re-organisation of the Camping's overseas operations. We
anticipate that these amounts will be largely recovered in the year ended 30
September 2005.
CAPITAL EXPENDITURE
Capital expenditure (net of receipts from disposals) in the year to 30 September
2004 was £13.5m (2003: £17.2m). The majority of this, a net £12.8m (2003:
£16.1m), was again accounted for by Camping. Mobile-homes (£12.3m before
disposals) accounted for the bulk of this expenditure. Sales of mobile-homes
generated £4.1m. Accommodation capacity will be reduced by 11% in 2005 and hence
we expect a significant reduction in the level of the Group's net capital
expenditure to £6.5m in the year ended 30 September 2005.
The Group's depreciation policy is to write down the cost of mobile-homes to an
estimated residual value over their projected economic life, usually six
seasons. Disposal proceeds in respect of mobile-homes sold at the end of their
useful life achieved net book value.
In order to extend their economic life, we continue to source mobile-homes of
higher specification from European manufacturers and to refurbish existing
units.
CASH FLOW
The Group's net borrowings at 30 September 2004 were £12.5m, compared to £23.3m
in 2003. Cash flow from our operating activities was £46.3m, another strong
performance.
Available bank facilities (£103.3m as at 30 September 2004) are sufficient to
meet the working capital, investment and bonding requirements of the Group. Due
to the highly seasonal nature of Camping's cash flow, headroom under these
facilities was £13.0m at the end of April 2004 when borrowings were 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.
FOREIGN CURRENCY AND INTEREST RATE RISK MANAGEMENT
The Group's transactional foreign currency exposures arise from the sales of
holidays in overseas markets and the costs of operating overseas, particularly
accommodation and travel. Currency revenues, principally Euros and US Dollars,
represent approximately 18% of total Group revenues. Currency outflows account
for 32% of all Group costs. The Group's policy is to hedge anticipated currency
exposures and we have entered into forward contracts in respect of our expected
trading cash flows for the next twelve months.
The Group's exposure to interest rate fluctuations on its borrowings is managed
by using interest rate swaps. At 30 September 2004, the proportion of the
Group's gross borrowings at fixed and capped rates was 68% and the average rate
was 5.9%. The gross cash position was fully floating.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
We will be required to adopt International Financial Reporting Standards (IFRS)
when preparing Group accounts for the year ended 30 September 2006. In
preparation for this, all IFRS requirements have to be reviewed in detail to
assess their likely impact on our reported results and the actions required to
collect the necessary data. To date, it has only been possible to reach some
high level conclusions and we will take time over the coming year to complete
calculations and have these reviewed by our auditors. We are aiming to start
collecting data on a dual basis (UK GAAP and IFRS) during the second half of
2004/5.
It is not possible to assess with certainty the effects of the transition to
IFRS. However, we believe that the major areas of impact on our retained profit
and shareholders' funds will be:
• Share-based payments, whereby the profit and loss account will include
an annual charge based on the fair value of awards made to employees.
• Capitalised goodwill, whereby the carrying value will be subject to
annual impairment reviews, with no amortisation charge.
• Open forward foreign exchange contracts which will be valued at
year-end market rates, with any gains or losses charged to the profit
and loss account.
Robert Baddeley
Finance Director
* Headline profits, headline EPS and interest cover are stated before goodwill
amortisation and impairment of £8.0m and exceptional costs of £2.6m.
Holidaybreak plc - Consolidated profit and loss account
Year ended 30 September 2004
Notes 2004 2003
£'000 £'000
Turnover 1 281,557 259,514
Cost of sales (209,216) (189,792)
___________ ___________
Gross profit 72,341 69,722
Net operating expenses (51,617) (44,513)
___________________________________________________________________________________________________
Operating profit before goodwill amortisation and impairment and
exceptional costs 1 31,380 31,780
Goodwill amortisation (2,735) (2,615)
Goodwill impairment (5,276) (827)
Exceptional costs (2,645) (3,129)
___________________________________________________________________________________________________
___________ ___________
Operating profit 20,724 25,209
Investment income 1,097 744
Amounts written off fixed asset investments - (600)
Interest payable and similar charges (4,430) (4,632)
___________ ___________
Profit on ordinary activities before taxation 17,391 20,721
Tax on profit on ordinary activities (5,014) (6,112)
___________ ___________
Profit on ordinary activities after taxation 12,377 14,609
Dividends paid and proposed 2 (11,478) (10,325)
___________ ___________
Retained profit for the year 899 4,284
=========== ===========
Earnings per ordinary share
Headline earnings per ordinary share 44.0p 44.4p
Basic earnings per ordinary share 26.5p 31.5p
Diluted headline earnings per ordinary share 43.7p 43.9p
Diluted basic earnings per ordinary share 26.7p 31.2p
=========== ===========
Holidaybreak plc - Consolidated statement of total recognised gains and losses
Year ended 30 September 2004
2004 2003
£'000 £'000
Profit for the financial year 12,377 14,609
Gain (loss) on foreign currency translation 108 (200)
___________ ___________
Total gains and losses recognised relating to the year 12,485 14,409
=========== ===========
Holidaybreak plc - Consolidated balance sheet
30 September 2004
2004 2003
Restated
(see note 5)
£'000 £'000
Fixed assets
Intangible assets 36,227 44,238
Tangible assets 70,559 71,994
Investments 15 15
___________ ___________
106,801 116,247
___________ ___________
Current assets
Assets held for disposal 3,526 3,750
Debtors 20,833 21,977
Cash at bank and in hand 31,363 33,791
___________ ___________
55,722 59,518
___________ ___________
Creditors: amounts falling due within one year (90,769) (95,479)
___________ ___________
Net current liabilities (35,047) (35,961)
___________ ___________
Total assets less current liabilities 71,754 80,286
Creditors: amounts falling due after more than one year (29,136) (40,443)
Provisions for liabilities and charges (6,122) (4,621)
___________ ___________
Net assets 36,496 35,222
=========== ===========
Capital and reserves
Called-up share capital 2,381 2,368
Share premium account 34,427 33,435
Other reserves (3,709) (2,971)
Profit and loss account 3,397 2,390
___________ ___________
Equity shareholders' funds 36,496 35,222
=========== ===========
Holidaybreak plc - Consolidated cash flow statement
Year ended 30 September 2004
2004 2003
£'000 £'000 £'000 £'000
Net cash inflow from operating activities (note 3) 46,274 47,373
Returns on investments and servicing of finance
Interest and other investment income received 1,334 865
Interest paid (4,264) (3,549)
Interest element of hire purchase payments (1,103) (1,043)
___________ ___________
(4,033) (3,727)
Taxation
UK corporation tax paid (6,580) (4,871)
Overseas tax paid (961) (1,157)
___________ ___________
(7,541) (6,028)
Capital expenditure
Purchase of own shares (738) (482)
Payments to acquire tangible fixed assets (11,040) (9,160)
Receipts from sale of tangible fixed assets 4,300 4,343
___________ ___________
(7,478) (5,299)
Acquisitions and disposals
Purchase of businesses and
subsidiary - (2,284)
undertakings (net of cash
acquired)
___________ ___________
- (2,284)
Equity dividends paid (10,674) (9,374)
___________ ___________
Cash inflow before financing 16,548 20,661
Financing
Issue of ordinary share 1,005 701
capital
New loans - 3,448
Repayment of borrowings (11,862) (18,312)
Capital element of hire (7,767) (6,983)
purchase payments
___________ ___________
(18,624) (21,146)
___________ ___________
Decrease in cash in the year (2,076) (485)
=========== ===========
NOTES
1. Segment information
2004 2003
£'000 £'000
____________________________________________________________________________________________________
Group turnover by geographical origin was as follows:
United Kingdom 230,036 208,249
Ireland 8,582 8,460
Netherlands and Belgium 22,245 21,722
Germany, Switzerland and Austria 15,586 17,108
Others 5,108 3,975
___________ ___________
281,557 259,514
=========== ===========
Group turnover and operating profit before goodwill amortisation and
impairment and exceptional operating costs by class of business was as
follows:
Operating profit before
goodwill amortisation and
impairment and exceptional
Turnover costs
2004 2003 2004 2003
£'000 £'000 £'000 £'000
__________________________________________________
Hotel breaks 120,895 97,776 14,487 11,011
Adventure holidays 37,417 33,310 3,160 1,911
Camping holidays 123,245 128,428 13,733 18,858
__________ __________ __________ __________
281,557 259,514 31,380 31,780
========== ========== ========== ==========
2. Dividends paid and proposed on equity dividends
2004 2003
£'000 £'000
________________________
Under provision in respect of final dividend 27 5
Interim dividend paid of 6.6p per ordinary share (2003 - 6.0p) 3,140 2,833
Final dividend proposed of 17.6p per ordinary share (2003 - 16.0p) 8,381 7,578
Dividends paid and proposed in respect of investment in own shares (70) (91)
__________ __________
11,478 10,325
========== ==========
If approved by shareholders, the proposed final ordinary dividend will be
paid on 19 April 2005 to those ordinary shareholders on the register on 25
March 2005 and will absorb £8,380,672.
3. Reconciliation of operating profit to operating cash flow
2004 2003
£'000 £'000
____________________________________________________________________________________________________
Operating profit 20,724 25,209
Depreciation charges and amortisation and impairment of goodwill 23,144 19,034
Decrease (increase) in debtors 1,144 (6,515)
Increase in creditors 1,262 9,645
At 30 September 2003 as restated 15 (2,971)
__________ __________
Net cash inflow from operating activities 46,274 47,373
========== ==========
4. Reconciliation of net debt
2004 2003
£'000 £'000
____________________________________________________________________________________________________
Decrease in cash in the year (2,076) (485)
Cash outflow from decrease in debt and lease financing 19,629 21,847
__________ __________
Change in net debt resulting from cash flows 17,553 21,362
New hire purchase contracts (6,734) (12,320)
Net debt at beginning of year (23,353) (32,395)
__________ __________
Net debt at end of year (12,534) (23,353)
========== ==========
5. Restatement of comparatives
During the year, the Group has adopted the requirements of UITF 38
"Accounting for ESOP Trusts" as a result of which the policy for accounting
for the Group's employee benefit trust was changed. Shares held within the
employee benefit trust are dealt with in the balance sheet as a deduction
from shareholders' funds.
As a result of this change in accounting policy, the comparatives have been
restated as follows:
Fixed asset Other
investments reserves
£'000 £'000
____________________________________________________________________________________________________
At 30 September 2003 as previously reported 3,073 87
Reclassification of ESOP shares to shareholders' funds (3,058) (3,058)
__________ __________
At 30 September 2003 as restated 15 (2,971)
========== ==========
There is no impact on results for the current or prior year.
6. Non-statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2004 or 2003, but is
derived from these accounts. Statutory accounts for 2003 have been
delivered to the Registrar of Companies and those for 2004 will be
delivered following the Company's Annual General Meeting. The auditors have
reported on these accounts; their reports were unqualified and did not
contain a statement under section 237 (2) or (3) of the Companies Act 1985.
The preliminary announcement has been prepared in accordance with
applicable United Kingdom accounting standards under the historical cost
convention. With the exception of the adoption of UITF 38 "Accounting for
ESOP Trusts" referred to in note 5 above, the principal accounting policies
of the Group have remained unchanged from those set out in the Group's 2003
Annual Report and Financial Statements.
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