First Choice winter losses rise to £78m

First Choice winter pre-tax losses increased to £78.2 million in the six months to April 30 against £66.7 million the previous half-year. 

Operating losses were up from £65.2 million to £68.7 million in the period. 

The group revealed that it had spent almost £95 million on nine acquisitions in the first half of its financial year.

First Choice confirmed the purchase of UK schools activity operator Travel Class for £6.4 million, as previously reported by TravelMole.

Other acquisitions include Canadian adventure travel company Trek Holidays and specialist yachting operator The Moorings.

Summer sales of mainstream holidays are up by 4% overall over the same period last year, with long haul showing the strongest growth with passengers booked up by 30%. Short haul sales for summer 2006 are down 5%, medium haul down 4% and long haul up 38%.

Activity holidays are up 48% in total for this summer and 5% on a like-for-like basis. Online destination services bednight bookings are up by more than 60%.

Control of distribution in the mainstream holiday sector – which saw winter pre-tax losses rise by £4 million to £58.7 million – remains a “key value driver”, the company said. Inhouse distribution has inncreased to 66% from 60% last summer with 31% coming via online channels, up from 24%.

“We will continue to invest in our direct distribution capability through both the online and retail channels to achieve our targets for controlled distrubution,” the company said.

“Our research confirms that customers continue to value travel shops for both holiday purchases and research and, accordingly, we are investing in our retail presence in specific regions of the UK in order to further drive controlled distribution.

“The investment will include franchise partnerships with independent agents and we will seek to open a number of new First Choice Retail stores in key towns where the First Choise brand is not currently well represented.” 

First Choice reduced winter capacity in the mainstream sector by a total of 8%, with 24% less in short haul, and 11% less in madium haul. Long haul capacity was increased by 44%. Revenue in short haul was down 20%, medium haul, down 9% and long haul, up 48%.

The two-ship Island Cruises joint venture with Royal Caribbean saw total revenues rise by 82% with passengers carried up by 77%. But the £2.2 million refit of a former Celebrity Cruises ship – now operating as Island Star – contributed to increased half-year losses by £1 million to £3.4 million. Winter profitability from first ship Island Escape increased by £500,000 and trading for the summer was described as being in line with expectations.

First Choice chief executive Peter Long said: “We are pleased with our first half performance and have seen our strategy to build a portfolio of leisure travel buisnesses pay dividends during the first half.

“Having a diverse portfolio of businesses and a flexible business model means that we are not over reliant on any one single destination or source market. By focusing on segments of the marketplace that demonstrate strong growth characteristics, we are satisfying customers’ increasing demand for differentiated holiday experiences.

“We remain very focused on a combination of organic and acquisition-led growth. The acquisition pipeline of specialist businesses is strong and will help us build significant leadership positions in the segments of the marketplace we find attractive.

“The outlook for the high season in July and August remains strong and we are confident of the outcome for the full year as we continue to prgress towards our 5% margin target by 2007.”

*See separate story.

Report by Phil Davies

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