1 the uk’s leading operator of specialist holiday businesses august 2002 august 2002
TRANSCRIPT
1
THE UK’s LEADING OPERATOR OF SPECIALIST HOLIDAY
BUSINESSES
August 2002
AU
GU
ST 2
00
2
2
One of only three quoted UK tour operators
Three operating divisions - Camping, Hotel Breaks and Adventure Holidays
2001 turnover £192.5m - pre-tax profits £23.8m (£21.6m after goodwill amortisation and exceptional operating costs)
Consistent growth record - five years of growth in profits, eps and dividend
Aiming to grow organically and through further acquisitions
Further profits and dividend growth in 2002
Holidaybreak plcOVERVIEW
3
4
Holidaybreak plcOUR RECORD (1)
Turnover Profit Before Tax*£m £m
106.4 113.5
142.4164.5
192.5
80.0
100.0
120.0
140.0
160.0
180.0
200.0
1997* 1998 1999 2000 2001
11.214.0
17.3
20.723.8
5.0
10.0
15.0
20.0
25.0
1997** 1998 1999 2000 2001
*12 months pro-forma* Before goodwill amortisation
and exceptional operating costs
COMPOUND GROWTH17%
COMPOUND GROWTH15%
**12 months pro-forma
5
Holidaybreak plcOUR RECORD (2)
Earnings per Share* DividendPence Pence
21.626.8 29.3
34.038.1
10.0
15.0
20.0
25.0
30.0
35.0
40.0
1997** 1998 1999 2000 2001
11.5 12.514.0
16.018.0
5.0
10.0
15.0
20.0
1997 1998 1999 2000 2001
**12 months pro-forma* Before goodwill amortisation and exceptional operating costs
COMPOUND GROWTH12% COMPOUND GROWTH
12.5%
6
UK travel industry overview
Our businesses
Common characteristics of Group companies
Financial information
Current trading and prospects
Holidaybreak plcTOPICS COVERED
7
Four major players in UK: Thomson (TUI/Preussag), My Travel (Airtours), Thomas Cook (C&N) and First Choice - 70% share of inclusive holidays sold and own 45% of high street agents. Further consolidation likely.
Vertical integration strategy exposed by recent industry trends
Many specialist operators and independent agents continue to thrive
Low cost airlines (Easyjet, Ryanair, Go etc) have challenged existing industry model and changed consumer behaviour
Distribution channels fragmenting - internet, teletext, TV channels, Off the page
UK Holiday SectorINDUSTRY DEVELOPMENTS
8
Consumers - more knowledgeable, more demanding, less brand loyal
Independent and tailor-made holidays increasingly favoured
Increase in multiple holiday taking and short breaks (domestic and overseas)
‘Grey’ market increasing in importance Other growth areas are long-haul and activity/
special interest Late booking trends partly driven by bargain hunting
and partly by lifestyle changes and more frequent travel
UK Holiday SectorCONSUMER TRENDS
9
UK
HO
LID
AY
MA
RK
ET
100
120
140
160
180
200
220
240
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001(est)
Gro
wth
Ind
ex
Overseas Short Breaks All Overseas Holidays
(Short breaks = 1-3 nights) Source: Mintel (2002)
Overseas Holidays 2001Short Breaks (m) 5.0Long Holidays (m) 32.8Total (m) 37.8Value (£bn) 16.9
Holidaybreak plcGROWTH IN OVERSEAS
Holidaybreak plcGROWTH IN OVERSEAS HOLIDAYS, 1991-2001
10
Holidaybreak plcGROWTH IN DOMESTIC HOLIDAYS, 1991-2001
UK
HO
LID
AY
MA
RK
ET
80
90
100
110
120
130
140
150
160
170
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001(est)
Gro
wth
In
dex
Short Breaks Long Holidays Total Holidays
Source: Mintel (2002)(Short breaks = 1-3 nights)
Domestic Holidays 2001Short Breaks (m) 36.5Long Holidays (m) 26.5Total (m) 63.0Value (£bn) 9.5
11
Quality market leading businesses in sectors with good
growth potential
Avoid volatile, low margin, short-haul package holiday
market
Organic growth combined with ‘bolt-on’ acquisitions
to existing divisions and acquisition of travel
businesses in new sectors
Characteristics of Group businesses provide an
excellent platform for growth and acquisition template
Holidaybreak plcPOSITIONING AND STRATEGY
12
Original and largest part of the Group - 54% of 2001 sales
Two market leading brands
- Eurocamp and Keycamp
(60% share in UK)
Pre-sited mobile-homes and tents on quality, third party owned camp-sites in France, Italy and seven other countries - flexible contracts
c.50% of customers non-UK (mainly German and Dutch)
Holidaybreak plc CAMPING DIVISION
13
Courier and children’s activity service
Tailor made packages - any day to any day
Self-drive holidays - ferry inclusive from UK
Mainly direct sell but some retail agent sales. Internet increasingly important
Mid to upper income, family customer base
Holidaybreak plc CAMPING DIVISION
14
Acquired 1995 - 30% of 2001
sales
Superbreak and Hotel Breaks
the main brands
Breaks in 1400 UK hotels
(200 in London)
No commitment allocations
Price guarantee to customers
Rail inclusive and theatre
breaks available
Holidaybreak plc HOTEL BREAKS
15
60% of sales through UK travel agents - sector share 65%
Direct and internet sales growing fast (nearly 40%)
Two on-line internet booking sites - Superbreak.com (UKand Eurobreaks) and Hotelnet.co.uk (worldwide)
Accommodation only European cities programme recently launched (450 hotels/40 cities)
Holidaybreak plc HOTEL BREAKS
16
Explore Worldwide and Regal Diving acquired in 2000 - 16% of 2001 sales
Explore is the UK market leader in worldwide adventure travel and largest European operator
Small groups with own tour leader - 100 countries
Scheduled flights Sells direct and through
overseas GSAs
Holidaybreak plc ADVENTURE
17
Regal is the leading UK operator of scuba diving holidays
All levels catered for - Red Sea (Egypt - 80% of sales). Maldives, Caribbean, Far East growing fast
Charter flights to Red Sea, scheduled flights to other destinations
Sells direct and through specialist dive shops/centres
Holidaybreak plc ADVENTURE
18
Market Leading businesses - Eurocamp, Keycamp,
Superbreak, Explore Worldwide and Regal
Growth opportunities - in all divisions
Healthy margins - much higher than sector norm
Low fixed cost commitments - flexible business models
Strongly cash generative - especially Hotel Breaks and
Adventure
Holidaybreak plcCOMMON CHARACTERISTICS
19
CAMPING Eurocamp and Keycamp combinedshare c. 60% in the serviced, pre-sitedsector in all the main markets and arerecognised as the leading brands in pre-sited camping and mobile-homeholidays
HOTEL BREAKS Superbreak and its subsidiary brandscurrently account for over 65% of hotelbreaks booked through UK travelagents
ADVENTURE Explore Worldwide has an estimatedUK market share of 40% and is also thelargest European operator ofAdventure holidays.Regal Holidays has an estimated 25%of the UK scuba diving market
Common CharacteristicsMARKET LEADERSHIP
20
CAMPING Profitable mobile-homes growing andreplacing lower margin tentsWider UK self-catering marketVolume potential in overseas markets,especially Germany
HOTEL BREAKS Short breaks a growth sectorDirect sales/internet/HotelnetNew European breaks programmeInbound
ADVENTURE Sector growing stronglyProduct development opportunitiesConsolidation in fragmented sectorOverseas markets
Common CharacteristicsGROWTH PROSPECTS
21
2001 2000
CAMPING 17.2% 16.6%
HOTEL BREAKS 9.5% 9.5%
ADVENTURE 10.9% 14.1%
GROUP 12.7% 13.4%
Common CharacteristicsHEALTHY OPERATING MARGINS
Adventure margin in 2000 shows part year only, following acquisitions
Holidaybreak margins are well above industry norms and compare favourably with charter air package operators
22
CAMPING No commitments to travel costsNo site ownershipFlexible camp-site contracts allow flexing of capacityto match demand and ensure healthy load factors
HOTEL BREAKS No commitments to hotel rooms (sale or returnallocations)Consistent gross margin (30%)No commitments to travel costsTravel agency commissions (av. 14.5%) linked to sales
ADVENTURE Scheduled air seats – no commitments (except Regal)Overseas operational costs almost all variableTours only run if target load factors achievedTours added if demand warrants
Common CharacteristicsLOW FIXED COSTS
23
CAMPING Substantial but flexible capexrewarded by rapid payback
HOTEL BREAKSAND
ADVENTURE
IT and office capex onlyNegative working capitalYear round positive cash flowStrong cash generation
Common CharacteristicsCASH GENERATION
24
2001 ROCE 21.7% (2000 : 20.4%)
Annual capex (mainly Camping) requirement
(+ £15m net) - depreciation + £12m
2001 interest cover 8.6 times - will increase
Net currency exposure limited
Strong operational cash flow but seasonal
Headroom within banking facilities for further
acquisitions
Holidaybreak plcFINANCIALS
25
Holidaybreak plc2001 PROFIT & LOSS ACCOUNT
Camping Hotel-Breaks Adventure Group£'000 £'000 £'000 £'000
Turnover 2001 103,691 57,768 31,030 192,4892000 102,357 46,054 16,107 164,518
Gross Profit 2001 35,773 10,966 9,265 56,0042000 34,703 8,742 4,863 48,308
PBIT 2001 17,833 5,466 3,375 26,6742000 17,001 4,390 2,276 23,667
All stated before exceptional operating costs and goodwill amortisationPR
ELIM
INA
RY
RES
ULTS
26
£5.9m loss* entirely normal (2001 : £6.7m*) *Before tax and goodwill amortisation
Hotel breaks - substantial growth at the top line- margin improvement
Adventure - pleasing sales performance following post September 11th
disruption
- reduced margins due to load factor pressures
Camping - similar loss to 2001 Interest charge down Substantial net debt reduction
Holidaybreak plcHALF-YEAR RESULTS
27
Camping performing ahead of mainstream
AIT operators, sales 6% up on 2001
Hotel Breaks continuing to perform very strongly -
sales 30% up on 2001
Adventure will achieve a creditable result in a difficult
year - sales currently 2% up on last year
Overall prospects for the year are good - further
earnings and dividend growth anticipated
Holidaybreak plcINTERIMS - TRADING AND PROSPECTS
(As at 7th May 2002)
28
Quality market leading businesses in attractive sectors
with good prospects for growth and also good
defensive qualities
Consistent record of earnings and dividend growth -
strongly cash generative
Further profits growth in 2002 expected
Holidaybreak well placed to benefit from current
holiday sector trends - very strong cash generation a
key characteristic of the business
We view the future with confidence
Holidaybreak plcSUMMARY