MYT Results
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NACUD thank you for that clear concise and informative post that pricks the sensationalist bubbles that we are so frequently the victim of, by the press, the misinformed, the doomsayers and the plain ill-wishers. Yes the money may well be ultimately from the depositers, however in view of all the other PC wacky schemes that money is constantly lent to, I for one am quite happy to see it going to a British company and a segment of the industry in which I am concerned, and where it at least stands some chance of being repaid, as opposed other massive write-offs that are incurred on a daily basis in the bank loan business.
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Report : MYT trouble caused by computer errors!
TheRegister is reporting that MyTravel's problems were caused by a screwed up computer system install...
http://www.theregister.co.uk/content/53/34517.html
http://www.theregister.co.uk/content/53/34517.html
Massive MyTravel losses blamed on botched IT system install
By Drew Cullen
Posted: 15/12/2003 at 15:22 GMT
MyTravel, the UK's biggest travel company, lost up to £60 on every holiday it sold last year. If that wasn't bad enough, the holiday group had no idea of the hole it was digging for itself - the firm thought it was making a profit of £40-£50 on each sale.
Upshot, MyTravel fell £911m to the red last week, of which the lion's share came from trading losses.
The company blames a botched IT system install for its woes. In 2001, the group put in a new £15m reservation system, from Anite Travel Systems to speed up computer traffic to and fro its Going Places retail shops. The system was also meant to interface with the group's new Oracle Financials installation as well as legacy systems.
In an interview with the FT, Peter McHugh, chief executive, takes up the story: "Other than being old, the old systems worked fine. The new systems were supposed to make things better but when you do a major upgrade, the systems need to talk to one another and have interfaces and as the new system was implemented and lost the interface between them."
MyTravel is not blaming the software, an industry standard (The FT notes that First Choice is also a customer and it produced strong figures last week), but "poor execution". This meant that important management information, including information on profit margin, disappeared in much of 2002. And no-one noticed!
According to McHugh, the systems are now at the stage where they talk to each other and are producing enough information to run the business properly - but "it's still not 100 per cent". ®
By Drew Cullen
Posted: 15/12/2003 at 15:22 GMT
MyTravel, the UK's biggest travel company, lost up to £60 on every holiday it sold last year. If that wasn't bad enough, the holiday group had no idea of the hole it was digging for itself - the firm thought it was making a profit of £40-£50 on each sale.
Upshot, MyTravel fell £911m to the red last week, of which the lion's share came from trading losses.
The company blames a botched IT system install for its woes. In 2001, the group put in a new £15m reservation system, from Anite Travel Systems to speed up computer traffic to and fro its Going Places retail shops. The system was also meant to interface with the group's new Oracle Financials installation as well as legacy systems.
In an interview with the FT, Peter McHugh, chief executive, takes up the story: "Other than being old, the old systems worked fine. The new systems were supposed to make things better but when you do a major upgrade, the systems need to talk to one another and have interfaces and as the new system was implemented and lost the interface between them."
MyTravel is not blaming the software, an industry standard (The FT notes that First Choice is also a customer and it produced strong figures last week), but "poor execution". This meant that important management information, including information on profit margin, disappeared in much of 2002. And no-one noticed!
According to McHugh, the systems are now at the stage where they talk to each other and are producing enough information to run the business properly - but "it's still not 100 per cent". ®
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MYT results
Results for financial year 2002-2003
Peter Mc Hugh
Dear Colleagues,
Recently we announced MyTravel Group plc’s results for the financial year 1st October 2002 – 30th September 2003. These show that the Company made an operating loss of £358.3 million before exceptional items and goodwill. The UK business accounted for £325.4 million of this loss. Taking account of exceptional items and goodwill, the Company made a loss before tax of £910.9 million.
While the £358.3 million operating loss is substantial, it should be remembered that it includes the £282.7 million loss from the first six months of our financial year that we declared in our half-year results in June.
Nevertheless, this level of performance is extremely disappointing. In this CEO Progress Report I want to go in to some of the details behind the result, and also outline the actions that we are taking to return to MyTravel to profitability.
Background to the results
Looking at the full twelve months of the financial year, the results that we have announced today are due to a combination of factors.
1. A significant proportion of the £358.3 million is made up of legacy and one-off issues which have substantially increased our trading loss. These include one-off costs associated with the sale of some of our businesses, as well as changes to our balance sheet in the light of both better information and the more conservative approach to measuring performance that we now use.
2. The Company’s structural issues did not enable us to respond to a very tough trading environment quickly enough. For a good deal of the financial year, market conditions in all three of our main markets – the UK, Northern Europe and North America - were very uncertain. The war with Iraq, the hot summer weather in Northern Europe and the UK, and the SARS virus in Canada all reduced booking levels. During this period, we were not sufficiently flexible to cope with market changes. For example, we had high levels of committed accommodation (particularly in the UK business) which we needed to fill. We also had aircraft capacity that needed to be utilised.
3. There were specific issues in the UK charter and distribution business – the single biggest part of the Company. Poor management information systems impacted that business’s ability to make reliable forecasts and to act on them. For example, poor decisions made in 2002 about the prices for summer 2003 products in the UK meant that many holidays did not cover their full costs. Weak trading in the summer 2003 lates market and cost control problems in the UK airline severely affected margins in this business.
The loss that we are reporting today reflects the issues that we were dealing with in financial year 2002-2003, which ended two months ago. Since then, we have made a significant start to turning MyTravel’s performance around. My aim is to restore MyTravel back to profit by September 2005, and I am determined that we will achieve this goal.
Starting the turnaround
At the time of the 2001-2002 results, we commissioned a Strategic Review covering all aspects of the Company. This was completed in Spring 2003 and gives us a clear plan for MyTravel’s turnaround. The Strategic Review made three core recommendations – reduce the proportion of fixed costs in the Company, improve asset utilisation and restructure the UK charter and distribution business.
We started working on these changes during financial year 2002-2003. In many cases, the financial benefits of these will only be delivered in future years (including this one) – too late to offset the losses from 2002-2003. We are in the process of implementing the remaining changes.
• Reducing fixed costs - Across the Company, costs have been cut in all areas. We have reduced commitments to guaranteed accommodation, especially in the UK. Out of necessity, we have also had to reduce the number of people we employ.
We have reduced the number of aircraft we fly - our fleet of four DC10-10s was retired, and we will reduce the total number of aircraft we use to 47 by April 2004. Our UK cruise ship operator, Sun Cruises, will permanently withdraw a ship from service in summer 2004.
• Better utilisation of assets – The effect of many of these changes is that we will have fewer assets, but they will be better used. It is easier for us to fill a smaller number of ships, aircraft and hotel rooms, than it was for us to find customers – who often give us low or negative margins – to fill the larger number of assets we used to have.
• Restructuring of UK charter and distribution business – This is well underway and involves the merger of the nine UK businesses in this area (such as Going Places retail stores, MyTravel Airways (UK) and Airtours Holidays) into a single organisation, with a single management team – led by Philip Jansen.
One of the most significant achievements of financial year 2002-2003 was the refinancing of the Company – a step that was vital in securing our future. In June, we reached an agreement with our bankers to extend £1.3 billion of credit facilities until May 2006. Three months later, we reached a settlement with the holders of our convertible bonds to extend these until January 2007.
These are both major successes that give us the time and financial space we need to turn round our performance and get back to profitability. The recent agreement to sell four, stand-alone businesses in North America for around US $250 million also gives us extra working capital that will help us implement the turnaround.
An additional element of the turnaround involves us exiting from high-risk, loss-making businesses, which are also non-core. Since October 2002, we have sold a number of businesses in this category, including our German business (Frosch Touristik), Vacation Express, SunTrips, and our operations in Poland amongst others. This move reduces the need for us to spend resources and effort on supporting such businesses, and allows us to focus on the core businesses which are the key to our long-term future.
These moves have put us in a strong position to deliver an improvement in performance this financial year. We are ahead of schedule on delivering the cost savings identified in the Strategic Review, and now also expect these to exceed £150 million.
New Group Finance Director appointed
I am extremely pleased to announce today the appointment of John Allkins as Group Finance Director. John becomes a member of the main PLC board and joins the Company with immediate effect.
Before joining MyTravel, John was for eight years Chief Finance Officer of Equant NV, the New York Stock Exchange and Euronext-listed company that runs one of the world’s larges data communications networks. Prior to this he spent nine years at BT Group plc in a variety of senior finance positions.
.
John Allkins takes over the role from John Darlington who has been acting as interim Chief Finance Officer basis since August. John returns to his previous role of Restructuring Officer, where he will play a major part in supporting the changes in the UK core charter and distribution business. I would like to thank John Darlington for all of his help and support over the last four months and welcome John Allkins to the Company.
Looking ahead
In the next few days you will receive a more detailed briefing from your manager about the results and how your particular area of the Company has performed. This will also cover the priorities that need to be acted on if we are to turn in a better performance for this financial year.
The plain fact is that we cannot ignore the results for 2002-2003. I understand the disappointment that many of you will feel about these results – I share that disappointment.
However, we must move on and continue the progress we are making in getting MyTravel back to profit. We have made a very strong start to this and have achieved a lot in the last twelve months, despite today’s results. We have a clear plan for getting the Company back to long-term profitability and we are implementing that plan vigorously.
We are now approaching the peak selling season, which, for most businesses, is the period immediately after Christmas. Every one of us has a role to play in ensuring that this period is a success. Our customers rely on us to provide them with great holidays – we should not disappoint them. We must do everything possible to maximise profitable sales and so avoid the sort of results we’ve seen today.
I know that all of you continue to put in a lot of hard work and effort on behalf of the Company. My thanks go to every one of you for your ongoing support and loyalty. Keep up the good work, keep your pride in the Company and keep the sales strong.
Peter McHugh,
CEO, MyTravel Group plc
Peter Mc Hugh
Dear Colleagues,
Recently we announced MyTravel Group plc’s results for the financial year 1st October 2002 – 30th September 2003. These show that the Company made an operating loss of £358.3 million before exceptional items and goodwill. The UK business accounted for £325.4 million of this loss. Taking account of exceptional items and goodwill, the Company made a loss before tax of £910.9 million.
While the £358.3 million operating loss is substantial, it should be remembered that it includes the £282.7 million loss from the first six months of our financial year that we declared in our half-year results in June.
Nevertheless, this level of performance is extremely disappointing. In this CEO Progress Report I want to go in to some of the details behind the result, and also outline the actions that we are taking to return to MyTravel to profitability.
Background to the results
Looking at the full twelve months of the financial year, the results that we have announced today are due to a combination of factors.
1. A significant proportion of the £358.3 million is made up of legacy and one-off issues which have substantially increased our trading loss. These include one-off costs associated with the sale of some of our businesses, as well as changes to our balance sheet in the light of both better information and the more conservative approach to measuring performance that we now use.
2. The Company’s structural issues did not enable us to respond to a very tough trading environment quickly enough. For a good deal of the financial year, market conditions in all three of our main markets – the UK, Northern Europe and North America - were very uncertain. The war with Iraq, the hot summer weather in Northern Europe and the UK, and the SARS virus in Canada all reduced booking levels. During this period, we were not sufficiently flexible to cope with market changes. For example, we had high levels of committed accommodation (particularly in the UK business) which we needed to fill. We also had aircraft capacity that needed to be utilised.
3. There were specific issues in the UK charter and distribution business – the single biggest part of the Company. Poor management information systems impacted that business’s ability to make reliable forecasts and to act on them. For example, poor decisions made in 2002 about the prices for summer 2003 products in the UK meant that many holidays did not cover their full costs. Weak trading in the summer 2003 lates market and cost control problems in the UK airline severely affected margins in this business.
The loss that we are reporting today reflects the issues that we were dealing with in financial year 2002-2003, which ended two months ago. Since then, we have made a significant start to turning MyTravel’s performance around. My aim is to restore MyTravel back to profit by September 2005, and I am determined that we will achieve this goal.
Starting the turnaround
At the time of the 2001-2002 results, we commissioned a Strategic Review covering all aspects of the Company. This was completed in Spring 2003 and gives us a clear plan for MyTravel’s turnaround. The Strategic Review made three core recommendations – reduce the proportion of fixed costs in the Company, improve asset utilisation and restructure the UK charter and distribution business.
We started working on these changes during financial year 2002-2003. In many cases, the financial benefits of these will only be delivered in future years (including this one) – too late to offset the losses from 2002-2003. We are in the process of implementing the remaining changes.
• Reducing fixed costs - Across the Company, costs have been cut in all areas. We have reduced commitments to guaranteed accommodation, especially in the UK. Out of necessity, we have also had to reduce the number of people we employ.
We have reduced the number of aircraft we fly - our fleet of four DC10-10s was retired, and we will reduce the total number of aircraft we use to 47 by April 2004. Our UK cruise ship operator, Sun Cruises, will permanently withdraw a ship from service in summer 2004.
• Better utilisation of assets – The effect of many of these changes is that we will have fewer assets, but they will be better used. It is easier for us to fill a smaller number of ships, aircraft and hotel rooms, than it was for us to find customers – who often give us low or negative margins – to fill the larger number of assets we used to have.
• Restructuring of UK charter and distribution business – This is well underway and involves the merger of the nine UK businesses in this area (such as Going Places retail stores, MyTravel Airways (UK) and Airtours Holidays) into a single organisation, with a single management team – led by Philip Jansen.
One of the most significant achievements of financial year 2002-2003 was the refinancing of the Company – a step that was vital in securing our future. In June, we reached an agreement with our bankers to extend £1.3 billion of credit facilities until May 2006. Three months later, we reached a settlement with the holders of our convertible bonds to extend these until January 2007.
These are both major successes that give us the time and financial space we need to turn round our performance and get back to profitability. The recent agreement to sell four, stand-alone businesses in North America for around US $250 million also gives us extra working capital that will help us implement the turnaround.
An additional element of the turnaround involves us exiting from high-risk, loss-making businesses, which are also non-core. Since October 2002, we have sold a number of businesses in this category, including our German business (Frosch Touristik), Vacation Express, SunTrips, and our operations in Poland amongst others. This move reduces the need for us to spend resources and effort on supporting such businesses, and allows us to focus on the core businesses which are the key to our long-term future.
These moves have put us in a strong position to deliver an improvement in performance this financial year. We are ahead of schedule on delivering the cost savings identified in the Strategic Review, and now also expect these to exceed £150 million.
New Group Finance Director appointed
I am extremely pleased to announce today the appointment of John Allkins as Group Finance Director. John becomes a member of the main PLC board and joins the Company with immediate effect.
Before joining MyTravel, John was for eight years Chief Finance Officer of Equant NV, the New York Stock Exchange and Euronext-listed company that runs one of the world’s larges data communications networks. Prior to this he spent nine years at BT Group plc in a variety of senior finance positions.
.
John Allkins takes over the role from John Darlington who has been acting as interim Chief Finance Officer basis since August. John returns to his previous role of Restructuring Officer, where he will play a major part in supporting the changes in the UK core charter and distribution business. I would like to thank John Darlington for all of his help and support over the last four months and welcome John Allkins to the Company.
Looking ahead
In the next few days you will receive a more detailed briefing from your manager about the results and how your particular area of the Company has performed. This will also cover the priorities that need to be acted on if we are to turn in a better performance for this financial year.
The plain fact is that we cannot ignore the results for 2002-2003. I understand the disappointment that many of you will feel about these results – I share that disappointment.
However, we must move on and continue the progress we are making in getting MyTravel back to profit. We have made a very strong start to this and have achieved a lot in the last twelve months, despite today’s results. We have a clear plan for getting the Company back to long-term profitability and we are implementing that plan vigorously.
We are now approaching the peak selling season, which, for most businesses, is the period immediately after Christmas. Every one of us has a role to play in ensuring that this period is a success. Our customers rely on us to provide them with great holidays – we should not disappoint them. We must do everything possible to maximise profitable sales and so avoid the sort of results we’ve seen today.
I know that all of you continue to put in a lot of hard work and effort on behalf of the Company. My thanks go to every one of you for your ongoing support and loyalty. Keep up the good work, keep your pride in the Company and keep the sales strong.
Peter McHugh,
CEO, MyTravel Group plc
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Honesty and an apology.
All,
Well, Peter McHugh's open and honest letter to MYT staff explains a lot. It also fills in the holes that the likes of myself and others have been trying to guess at for ages too.
I hope that the turn around pland can be implemented and that the situation is recoverable, because as I have said before (as have others) a failed MYT is not really in our best interests in this game.
And that is irrespective of whether you work for any of the opposition.
Additionally, Tailscrape would actually like to APOLOGISE to a couple of MYT guys on here. kinsman and Spy in particular. I know how stressful this time has probably been for you, and indeed your families. Hopefully, you will see a better 2004 and 2005 going forward.
Tailscrape's views have been too forceful at times, and perhaps ill considered... even if they have not been incorrect always. I know what a stressful feeling is, and with hindsight the comments are probably un needed.
And, I am sure you will all be glad to hear that MY alter ego TAILSCRAPE is NO MORE! This is his last posting. For ever.
Tailscrape is dead. Long live Tailscrape.
Let's hope this ends the acrimony. Season's Greetings.
Well, Peter McHugh's open and honest letter to MYT staff explains a lot. It also fills in the holes that the likes of myself and others have been trying to guess at for ages too.
I hope that the turn around pland can be implemented and that the situation is recoverable, because as I have said before (as have others) a failed MYT is not really in our best interests in this game.
And that is irrespective of whether you work for any of the opposition.
Additionally, Tailscrape would actually like to APOLOGISE to a couple of MYT guys on here. kinsman and Spy in particular. I know how stressful this time has probably been for you, and indeed your families. Hopefully, you will see a better 2004 and 2005 going forward.
Tailscrape's views have been too forceful at times, and perhaps ill considered... even if they have not been incorrect always. I know what a stressful feeling is, and with hindsight the comments are probably un needed.
And, I am sure you will all be glad to hear that MY alter ego TAILSCRAPE is NO MORE! This is his last posting. For ever.
Tailscrape is dead. Long live Tailscrape.
Let's hope this ends the acrimony. Season's Greetings.
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This obviously going to run and run and run, so lets all agree that at least to the dismay of some that MYT are going to continue to trade in the short term and hopefully for a lot longer. May I also say without any falseness whatsoever a merry christmas to all of my compatriots in the airline business, no matter which company you work for and lets hope for a prosperous 2004.
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There seems altogether too much schadenfreude in this debate; what we all need is a healthy industry pulling together. There are enough people out there who want to see everything connected with aviation given a huge boot.
Good Luck to MYT, and a Merry Christmas to us all.
Good Luck to MYT, and a Merry Christmas to us all.
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I have trawled through most of the posts on this and find myself scratching my head, lots of financial analysis etc but where is the poor old punter in this ? Is this company on the ball, does it know what the customer actually wants ?? Who is its customer ? Would you book a holiday with it or go with another operator?
Seems to me lots of people have elected to go somewhere else, with someone else. What has it got to offer that makes you wake up shouting YES YES YES ? So why not sack the marketing team and refocus the product ? Other companies are doing OK and tourism is certainly growing.... Don't you just hate it when someone forgets to ask the customer what they want ? Or is it just greed and arrogance ??
Airtours started out OK, so where have they gone wrong ? Who lost touch with whom ? and why ??
Seems to me lots of people have elected to go somewhere else, with someone else. What has it got to offer that makes you wake up shouting YES YES YES ? So why not sack the marketing team and refocus the product ? Other companies are doing OK and tourism is certainly growing.... Don't you just hate it when someone forgets to ask the customer what they want ? Or is it just greed and arrogance ??
Airtours started out OK, so where have they gone wrong ? Who lost touch with whom ? and why ??
Ut Sementem Feeceris
Seeta said "Other companies are doing OK".
One other Company is doing ok - First Choice. Thomas Cook and TUI are also struggling. TC has 17 (?) aircraft sitting on the ground in Germany at the moment doing nothing.....
MYT sold millions of hoilidays last year - but at a loss!! It's not a case of the punter deserting but a case of not charging the right price and not keeping costs under control. Hopefully this coming year will see a reversal of fortune with the problems of last year being addressed.
It is certainly tough times in the IT business at the moment.
Happy Christmas to all.
A4
One other Company is doing ok - First Choice. Thomas Cook and TUI are also struggling. TC has 17 (?) aircraft sitting on the ground in Germany at the moment doing nothing.....
MYT sold millions of hoilidays last year - but at a loss!! It's not a case of the punter deserting but a case of not charging the right price and not keeping costs under control. Hopefully this coming year will see a reversal of fortune with the problems of last year being addressed.
It is certainly tough times in the IT business at the moment.
Happy Christmas to all.
A4
