First Choice releases trading statement

The rise in Air Passenger Duty, year-on-year increases in fuel costs and buying two extra long-haul aircraft for the Summer season has impacted First Choice margins for Winter 06/07.

In its trading update released today, First Choice said these challenges will be partially offset by the “benefits of continuing to increase control of our distribution”.

In the eight weeks since the company’s AGM statement on March 7, the performance of its Mainstream Holidays Sector continues to suffer from ongoing challenging trading conditions in the UK market, it said.

Total revenues for the Winter season are up 10% but volumes are slightly down by 2%.

Its long-haul revenues are up 37% and volumes up 26%, as it continues “to benefit from the investment in our market-leading differentiated long-haul programme”.

“Summer 07 trading has remained broadly in line with our expectations since the AGM, with revenues now cumulatively up by 2% on lower volumes of 2%,” said the statement.

“We have cut capacity in the short-haul market, while maintaining capacity levels in the medium-haul segment where we are experiencing strong demand for Turkey and Greece.

“Within long-haul, we have increased capacity by 25% as the two additional B767s have enabled us to expand our programme in popular destinations such as Mexico, Dominican Republic, Cuba and Costa Rica.

“Accordingly, long-haul revenues are up 23% on volume growth of 17%. Again, however, as anticipated margins are being adversely affected by the rise in APD that is not currently being fully recovered from passengers.”

In its Specialist Holidays Sector, the European businesses are growing Winter revenues by 3% on volume growth of 9%.

For Summer, revenues are up 24% on higher volumes (up 18%).

In the Activity Holidays Sector, revenues are up 2% for the winter season and up 5% for summer, while the Adventure division continues to benefit from growth in demand for adventure travel with revenues up 6% for the Summer.

Revenues for its Online Destination Services – Bedsonline, Hotelbeds and Hotelopia –are up 46% on volume growth of 35% for Winter, and up 60% and 39% for Summer respectively.

“The integration of laterooms.com is progressing well, with the business trading strongly with revenues up 79%,” said First Choice.

The statement said in the financial year to date, First Choice has made acquisitions to date with a maximum aggregate consideration of £163.2m of which £134m has already been paid (2006: £153m of which £133m was paid).

“We continue to see attractive acquisition opportunities and to target leisure travel companies that have excellent growth characteristics and the ability to generate superior returns for our shareholders,” it said.

It revealed nothing further about the proposed merger with TUI, which is still in the hands of the European Commission.

“ We expect to be informed by 16 May 2007 of either Phase I clearance or a further review (Phase II),” it said.

By Bev Fearis