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Interim Results 2007Interim Results 2007
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Proposed acquisition of PGL, Proposed acquisition of PGL, formation of Education divisionformation of Education division
May 2007
2 European specialist holiday groupEuropean specialist holiday group
Important Notice
The information in this document does not constitute or form any part of an offer or invitation to sell, or issue, or any solicitation of any offer to purchase, subscribe for or otherwise acquire any shares or other securities in Holidaybreak plc (“Holidaybreak") in any jurisdiction, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract therefor. No reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its completeness. No representation or warranty, expressed or implied, is given on behalf of Holidaybreak or any of its respective directors, employees, agents or advisers as to the accuracy or completeness of the information and no liability is accepted (and all such liability is hereby excluded) for any such information or opinions. Readers of this document are reminded that the information in this document has not been verified and is liable to change and that any decision to acquire shares in Holidaybreak should be made only on the basis of information contained in the final class 1 circular to be issued by Holidaybreak which may be different from the information contained in this document. This document is being supplied to you solely for your information and may not be reproduced or further distributed to any other person or published, in whole or part, for any purpose. This document is intended only for distribution to persons who are persons falling within Articles 19 or 49 (2)(a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by or sent to persons who are not relevant persons. The distribution of this document in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any such distribution could result in a violation of the law of such jurisdiction.
The information in this document is confidential and, as such, may constitute inside information relating to the securities of Holidaybreak for the purposes of relevant insider dealing laws.
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Holidaybreak plcAgenda
Bob Ayling (Chairman) - Overview
Carl Michel (Group Chief Executive) and Bob Baddeley (Group Finance Director) - Results
- Highlights- Finance Review- Divisional Review
- Proposed Acquisition of PGL
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Holidaybreak plcHighlights
Interim results - Solid performance - DPS +10%Current trading broadly in line with expectationsSatisfactory trading outcome anticipated for full year
Proposed acquisition of PGL - An excellent strategic opportunity - A profitable, growing business in the attractive outdoor education and adventure sector
Interim Results for the six Interim Results for the six months ended 31 March 2007months ended 31 March 2007
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FINANCE DIRECTOR’S REVIEW
BOB BADDELEY
Holidaybreak plcINTERIM RESULTS 2007
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Interim Results 2007FINANCIAL HIGHLIGHTS
Revenues +13% to £100.6m (2006 : £88.7m)
EBITA loss £-5.7m (2006 : £-5.3m)
Net debt reduced by £6.6m to £29.6m (2006 : £36.2m)
Dividend up 10%
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2007 2006£m £m
Revenue 100.6 88.7
EBITA (5.7) (5.3)
Operating loss (6.8) (5.8)
Loss before tax (7.9) (6.3)
Loss per share (11.5p) (9.6p)
Interim Results 2007INCOME STATEMENT
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Interim Results 2007DIVISIONAL RESULTS
Hotel Breaks Adventure Camping Group
Travel
£m £m £m £m
Revenue 2007 61.3 39.1 0.2 100.6
2006 55.2 33.5 - 88.7
EBITA 2007 6.7 1.2 (13.6) (5.7)
2006 6.8 1.0 (13.1) (5.3)
Amortisation 2007 (0.6) (0.5) - (1.1)
2006 (0.3) (0.2) - (0.5)
Operating profit (loss) 2007 6.1 0.7 (13.6) (6.8)
2006 6.5 0.8 (13.1) (5.8)
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Interim Results 2007CASH FLOW
2007 2006£m £m
EBITDA (4.6) (4.2)Working capital movement (4.2) (1.4)Operating cash flow (8.8) (5.6)Capital expenditure (net) (9.0) (4.9)Tax (5.4) (2.8)Interest (0.9) (0.4)Free cash flow (24.1) (14.0)Loans and share issues 23.8 11.3Acquisitions & intangibles (3.3) -(Decrease) in cash (3.6) (2.7)
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Interim Results 2007BALANCE SHEET
2007 2006£m £m
Intangibles 76.6 64.0Property Plant & Equipment 65.7 67.0Non-current assets 142.3 131.0Cash and cash equivalents 50.2 43.9Net current liabilities (69.3) (59.9)Short term borrowings (67.4) (65.7)Long-term liabilities and provision (11.2) (13.9)Net Assets 44.6 35.4
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CEO REVIEW
CARL MICHEL
Holidaybreak plcINTERIM RESULTS 2007
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Interim Results 2007HOTEL BREAKS
HOTEL BREAKS
Half year EBITA down slightly at £6.7m (2006: £6.8m)
Sales currently up 8%
Acquisition of West End Theatre Bookings at the end of January
Growth in ‘bundled’ sales – now 38% of turnover (23% of bookings) versus 27% (and 16%) last year
Overseas hotels now at 3,200 (vs. 2,400 last Sept.)
Steady progress
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Interim Results 2007ADVENTURE TRAVEL
ADVENTURE TRAVEL
Half year EBITA at £1.2m (2006: £1.0m)
Outlook for summer is for +7% sales growth
Launch of new specialist Explore brochures – Archaeology and Eclipse/Astronomy
Families product continues to grow strongly – UK up 25% and NL up 117% - to about 13% of business
Americas and Asia performing well, Middle East/Egypt down around 25%
Travelplus (recently acquired German business) performing ahead of expectations
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Interim Results 2007CAMPING
CAMPING
Half year loss of £13.6m (2006: £13.1m)
Capacity down 4% (mobile homes –2%, tents –12%)
Sales level with last year, 85% sold to date
Strong growth in Irish market
Mobile home occupancy forecast to increase to 101 days this year (up 4 days on last year)
Outcome will be determined by late UK booking market – unlike 2006 where stock was sold early, ahead of the World Cup
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Interim Results 2007STRATEGIC DEVELOPMENTS
STRATEGIC DEVELOPMENTS
PGL fits with strategic framework announced last year
Healthy pipeline of other deal opportunities especially in Adventure Division, both in Europe and UK
Product extensions
New sales areas
Organic growth opportunities in each division
All areas looking to increase ‘value added’
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Interim Results 2007WEB DEVELOPMENTS
WEB DEVELOPMENTS
Hotel Breaks have launched PayPal processing, ‘My Holiday’ reviews, live hotel connectivity and RSS
Next projects to include gift certificates/vouchers, video streaming and web services (enabling content to be sent to more partners)
Indian software development - new XML links into Hotelnet will dramatically increase overseas supply
New website at Eurocamp Independent
Relaunch of Explore website. Podcasts and Weblogs launched last month
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Interim Results 2007OUTLOOK
OUTLOOK
Hotel Breaks
Sales intake for Hotel Breaks up 8%
Adventure
Current summer sales up 7%
Camping
Currently over 85% booked for the whole season
In line with plan
Satisfactory trading outcome anticipated
Proposed acquisition of PGL, Proposed acquisition of PGL, formation of Education divisionformation of Education division
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Proposed acquisition of PGLHighlights
PGL is UK market leader in residential, outdoor education and adventure sector for UK schools
c.250,000 children trips per annum, serve c.4,600 schools
Opportunity for growth
Experienced PGL management team remaining with the business
Creates fourth operating division for Holidaybreak, the Education Division, with good strategic fit
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Proposed acquisition of PGL Highlights
Consideration for PGL: c. £50m for equity, with c. £50m debt refinanced
Revenue 2007: £50.6m (2006: £47.0m), EBITDA 2007: £8.4m (2006: £6.8m), EBIT 2007: £6.3m (2006: £5.0m)(1)
Historic underlying revenue growth of 7% p.a. 2005-2007
Property portfolio valued at £93m
Expected to be earnings enhancing in first full financial year of ownership(2)
Good visibility of earnings
Strong repeat booking rates (c. 80%)(3)
(1) Stated before exceptional items
(2) This statement is not intended to constitute a profit forecast for the financial year ending 30 September 2007 or for any other period. In addition, this statement should not be interpreted to mean that earnings per share (before any one-off costs and amortisation of intangible assets) will necessarily be greater than those for the relevant preceding financial period
(3) In PGL’s residential, outdoor education and adventure division in the UK on a historic basis
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Proposed acquisition of PGL The UK schools outdoor education and adventure market Opportunity for growth
Active promotion of benefits of outdoor learning by UK government
Trend towards more outsourcing to commercial operators
Increasing complexity of organising the trips
Health and safety requirements
Reduction in number of LEA centres
Direct funding of schools has reduced LEA financial resources
Schools have greater freedom to choose location and provider of school trips
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Proposed acquisition of PGL Information on PGL (1)
Market leader in the UK outdoor education and adventure sector with a strong brand position
Operates in providing residential activity centres, primarily at key stage two level for 8-12 year olds
Runs overseas school tours and ski trips, mainly targeted at secondary school children (12-18 year olds)
Brand respected in the market with 50 years of operation
Operates 26 activity centres, which are on average larger than other operators
UK: 17 sites (13 owned); France: 8 sites (7 owned); Spain: 1 site
c.7,100 beds
PGL offers a wider range of activities
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Proposed acquisition of PGL Information on PGL (2)
Attractive financial characteristics
Attractive operating margins
Good visibility of earnings and very early booking profile (>90% to y/e Feb ’08 and c.60% to y/e Feb ’09)(1)
Growth opportunities in the UK and continental Europe, both organically and potentially through acquisition in a fragmented market place
Priority in short term: increase capacity at existing sites and hired-in centres
Currently, PGL works with 13% of primary and 33% of secondary schools within 2 hour drive of its UK centres
Experienced management team, overseen significant change and growth in recent years, remaining with the business
(1) Relating to UK Adventure bookings as a proportion of forecast level
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17 Sites in UK
13 owned
4 rented
Well located
Dalguise
Caythorpe Court
Marchant’s Hill (incl. Bethany)
Little Canada
Osmington Bay
Beam House
Tregoyd
Hillcrest
Boreatton Park
Barton Hall
Loch Ranza
Llwyn FillyFulmer Grange1
Whitecliff Bay1
Court Farm
PGL UK Centre Locations
Proposed acquisition of PGL Overview of PGL sites in the UK
Note: 1Hired PGL Centres
Nodes Point1
Shorefield1
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Proposed acquisition of PGL Strategic rationale
PGL’s strong brand and market leading position consistent with characteristics of Holidaybreak’s other divisions
History of growth and good margins
PGL enjoys a complementary seasonality to Holidaybreak, especially its Camping Division Efficiencies in recruitment, training and retention of seasonal staff Utilisation of Camping Division spare capacity during PGL’s peak periods Enhance Camping Division offering with PGL-supplied activities
Over time, potential to exploit Complementary marketing and distribution (e.g. Explore’s School Adventure product) Transfer of management and operational skills (e.g. capacity management) New product and geographical development (strengthen presence in UK regions with
sparse centre coverage, investigate other sites in NW Europe)
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Proposed acquisition of PGL Integration plans
PGL to become the fourth operating division of Holidaybreak – Education Division
Martin Davies, PGL’s CEO, to continue in this role post acquisition as MD of Education Division and join Holidaybreak’s plc board
Other senior PGL management to remain
As with existing three divisions, continue to operate relatively autonomously
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Proposed acquisition of PGL Summary terms and financial effects of the acquisition Acquisition to be financed from an increased bank facility
Completion, subject to shareholder approval, expected to occur in June 2007
The acquisition of PGL is expected to:
be earnings enhancing in the first full financial year of ownership(1)
create returns in excess of the Group’s weighted average cost of capital(1)
(1) These statements are not intended to constitute a profit forecast for the financial year ending 30 September 2007 or for any other period. In addition, these statements should not be interpreted to mean that earnings per share (before any one off costs and amortisation of intangible assets) will necessarily be greater than those for the relevant preceding financial period.
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Proposed acquisition of PGL Summary Acquisition of PGL for c. £50m, with existing c. £50m debt refinanced
Strong brand and market leading position
Excellent repeat bookings and high visibility of earnings due to very early booking profile
A well located property portfolio
Opportunities for growth
Active promotion of benefits of outdoor learning by UK government
Trend to outsourcing
Reduction in number of LEA centres
Potential to exploit opportunities with existing Holidaybreak group
Acquisition expected to be earnings enhancing in the first full financial year of ownership(1)
(1) This statement is not intended to constitute a profit forecast for the financial year ending 30 September 2007 or for any other period. In addition, this statement should not be interpreted to mean that earnings per share (before any one off costs and amortisation of intangible assets) will necessarily be greater than those for the relevant preceding financial period.
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AppendicesIllustrative pro forma financial information
HOLIDAYBREAK PGL PRO FORMA GROUPYear end 30-Sep-06 23-Feb-07
PROFIT AND LOSS ACCOUNT
Turnover 304.5 50.6 355.1
EBITDA 46.9 8.4 55.3
EBIT 34.3 6.3 40.6
Profit before taxation 32.1 2.2
Tax rate 30.2% (36.1)% c.30.0%
Profit after taxation 22.4 3.0
BALANCE SHEET
Net assets 59.1 1.3
Net debt 3.1 49.8
£m
Notes
1. Sourced from latest available public information (Holidaybreak: Full year results to 30 September 2006, PGL: 12 months to 22 February 2007)
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Turnover (£m) Operating profit before exceptional items (£m)
39%
14%
31%
16%
Hotel Breaks Adventure Travel Camping Education
Notes
1. Sourced from latest available public information (Holidaybreak: Full year results to 30 September 2006, PGL: 12 months to 22 February 2007)
34%
22%
30%
14%
Hotel Breaks Adventure Travel Camping Education
AppendicesPro forma divisional split
48%
16%
36%
Hotel Breaks Adventure Travel Camping
40%
25%
35%
Hotel Breaks Adventure Travel Camping
Before
After
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AppendicesPGL historic financials
PGL PGL PGLYear end 24-Feb-05(1) 23-Feb-06(2) 22-Feb-07(3)
£000
INCOME STATEMENT
Turnover 35,332 47,038 50,630
EBITDA 2,252 6,816 8,424
Operating profit(4) 942 5,009 6,279
BALANCE SHEET
Total assets 68,818 77,342 82,217
Net debt 13,038 47,559 49,784
(1) These results reflect the aggregation of the consolidated results and balance sheet of PGL Voyages Limited and subsidiary undertakings and theresults of PGL Air Travel Limited. PGL 3D Education and Adventure was acquired by PGL Voyages Limited on 19 July 2004(2) These results reflect the aggregation of the consolidated results and balance sheet of PGL Group Limited and subsidiary undertakings, theconsolidated results and balance sheet of PGL Voyages Limited and subsidiary undertakings and the results of PGL Air Travel Limited.(3) These results reflect the aggregation of the consolidated results and balance sheet of PGL Group Limited and subsidiary undertakings and theresults of PGL Air Travel Limited.(4) Before exceptional items
Source: Consolidated financial report
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Note: YHA Centres estimated based on a sample of ‘Learn4Real’ centres which offer activity programmes. Source: Management
AppendicesUK adventure centre marketUK Residential Activity/Education Centres and Beds: 2007
Number of Centres Number of Beds
100
5,849
28
19
5,424
17
1,330
12
1,790
11
2,450
4
700
2,057
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Centres Beds
LEAs
YHA
PGL
Smaller Independents
c. 25% of total beds
Medium Sized Operators
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Appendices Acquisition accounting
Under IFRS, PGL’s forward order book, customer lists and brand value will be treated as intangible assets and shown at fair value in the balance sheet
Approximate values are:
Brand £12m
Customer lists £3.2m
Order book £0.8m
Intangible assets will be amortised as revenue - approx full year charge will be £0.6m.
The amortisation will be above the operating profit line and will impact reported earnings
It is expected that the amortisation will be detailed as a separate line items on the face of the income statement