Jack the Lad,
Good for you. That is your opinion. You are entitled to it, just like I am to mine. So, we agree on that.
As an aside, there are two more articles in today's SUNDAY TIMES.
Both are posted below.
Sharewatch: Dickens of a difference in two tour firms
Edited by Dominic O'Connell
THIS week’s results include a tale of two tour operators, First Choice and MyTravel.
With apologies to Dickens, for the former it will hardly be the best of times, but for the latter it will definitely be the worst. All tour operators face hard times, with terrorism, Sars and lack of consumer confidence making selling holidays an uphill task, but First Choice is at least meeting its shareholders’ great expectations. This week it is likely to report pre-tax profits of £80m-£85m, in line with analysts’ expectations.
But a nasty twist is waiting for MyTravel shareholders. The company could, according to some estimates, lose more than £300m at the pre-tax level, with perhaps as much again taken in exceptional items. Wrapped up in this sorry set of figures is the admission — first made at a recent company EGM — that MyTravel made a hefty loss during the peak summer months, traditionally the time that British holiday companies make bumper profits.
Someone had to pay the price and, as we predicted last week, Duncan Wilson, chief executive of UK operations and a main-board director, resigned on Friday. In the statement accompanying his departure no mention was made of the mess the company made of this year’s trading, but you don’t have to be a genius to link that awful performance with Wilson’s abrupt farewell.
It is tempting to compare and contrast the fortunes of First Choice and MyTravel to try to divine what makes a good holiday company. But it is a meaningless exercise.
First Choice, which closed last week at 137¾p, kept its head above water because it did what any well-managed business would do when things turn sour — it cut back capacity, judged the market correctly in terms of discounts, and moved away from the cut-throat mass market to more lucrative niche products. Not exactly rocket science.
Gallingly for a company that was once lauded as the smartest operator in British leisure, MyTravel appears to have been unable to do any of this.
After shooting itself in the foot last year with a string of profit warnings, accounting black holes and top-level departures, the company has misjudged the market, despite protestations earlier in the year that its products were selling at decent prices.
Its parlous financial position means it cannot afford many more mistakes like this and as the share price indicates, falling back last week to 11p — not far off its year-low of 7½p — the prognosis is not good.
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MyTravel fears for survival over losses of £600m
Dominic O’Connell
THE embattled MyTravel holiday company is set to unveil losses in excess of £600m when it reports its full-year results this week.
MyTravel’s pre-tax loss is expected to be about £350m, but when exceptional items are added — mainly related to restructuring costs, goodwill write-offs on disposals and accounting adjustments — it is expected to exceed £600m.
The deficit is about 10 times greater than the company’s market capitalisation, which stood at £63m at the close of trading last week.
MyTravel has been in crisis since a string of profit warnings and the discovery of an accounting black hole in 2002 led to a boardroom clear-out. But its problems were exacerbated this year by a failure to cash in on peak summer demand.
British tour operators traditionally make all their money in the summer, but MyTravel stunned shareholders last month by saying in a circular that summer trading had been “weaker than expected” — which was taken as a profit warning.
Before the circular, released at an extraordinary meeting, analysts were forecasting full-year pre-tax losses of about £170m, but they now expect the figure to be double that.
As predicted in The Sunday Times last week, Duncan Wilson, chief executive of the company’s UK tour operations and a main board director, resigned on Friday. MyTravel’s statement announcing the departure said Wilson felt “his current role had come to a natural conclusion,” and made no mention of the poor summer trading.
But executives at rival firms said the two events were clearly linked. “You do not have to be Einstein to work out that if you have bad trading in the UK and the UK boss leaves, then that might just be the reason for his going,” one said.
Wilson’s exit takes the tally of departed directors in the past 12 months to seven — all but one of them executive directors.
At the extraordinary meeting, MyTravel also warned shareholders it might not have sufficient cash to survive the next year if it did not win backing for a series of disposals. Shareholders gave their approval for the sell-off, but the company’s share price has continued to slide, finishing last week at 11p, 3½p off its year-low.
The price of the company’s debt has also tumbled. The company’s convertible bond, part of which will be traded for equity under a complicated financial restructuring agreed earlier this year, was on Friday trading at 22p in the pound.
Analysts said the company faced an uncertain future, but poured cold water on City rumours that its banks — led by Deutsche Bank and Bank of America — might take it private.
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I will refrain from commenting, or offering an opinion, save to say that it would appear that I am not the only person who shares the same opinion.
The last line about the banks not taking the company private do say a lot IMHO.
However, the articles are both written by the same author as last week... which may invalidate their value in some people's eyes. But, seeing as they are not that complimentary, they will be dismissed as unfair and favouring other firms by some.
Discuss....