MyTravel faces City fine

City regulator the Financial Services Authority has moved to impose an unspecified fine on MyTravel for “contraventions” to the Listing Rules.

The troubled group said it rejected the allegations which relate to events in the period between July and October 2002 and announced an appeal. The fine is believed to relate to a series of profit warnings given by the company’s previous management two years ago.

MyTravel revealed the FSA intervention two days after it emerged victorious from a High Court battle to secure the right to for an £800 million debt restructuring which had been opposed by bondholders.

The group said it received notice from the FSA on November 4 indicating that it faced a financial penalty.

MyTravel said: “The board rejects the allegations in the decision notice and intends to refer the decision to the Financial Services and Markets Tribunal. The Board does not believe that the decision notice will have a significant effect on the financial position of the company.”

Meanwhile, MyTravel confirmed that it expects to break-even in the year to September 2004.

In a trading statement prior to the release of year-end financial results next month, the group said its operating result would be “approximately break-even”

The group’s proposed business plan for the year ending October 31, 2006, shows its three divisions making operating profits.

MyTravel issued a statement saying: “The board believes that following the completion of the restructuring there will be a good prospect of successfully implementing the business plan.”

But MyTravel admitted that fuel and currency risk is “largely unhedged at present” but said the restructuring was expected to lead to additional hedging becoming available.

Completion of the restructuring will result in the group’s interest costs falling significantly, the group added.

Chief executive Peter McHugh said: “We have a clear strategy for MyTravel’s return to sustained profitability. There is still much to be done, particularly in the UK, but overall I am greatly encouraged by our progress.”

MyTravel said it continued to see an improving performance in the UK. Capacity has been reduced “significantly” for both the winter and summer to bring it into line with demand for brochure holidays.

Referring to the UK, MyTravel said: “Bookings are ahead of last year as a percentage of available capacity for both the current winter season and the summer season 2005.”

In addition, the group said further steps had been taken to reduce its risk and to increase its operational flexibility.

“The company’s exposure to guaranteed accommodation is reducing at a faster rate than its capacity,” the statement said.

“In the UK, the number of aircraft in the fleet will fall from 33 to 24. With the departure from the fleet of the last cruise ship in May 2005, the company will cease to be a cruise tour operator on a risk basis.”

To maintain a presence in the cruise sector, MyTravel has established The Cruise Store, a cruise retail business selling different cruise lines by telephone, internet and through Going Places.

The group plans an extraordinary general meeting on December 20 to put the restructure plans to shareholders.

“The terms of the proposal to shareholders are the same as those announced on October 13, namely that shareholders will retain 4% of the enlarged share capital of the company,” the statement said.

“The company is also in the process of finalising a circular for posting to shareholders and general creditors containing the explanatory statement required in connection with the scheme of arrangement, and giving notice of the meetings of the shareholders and general creditors required for the scheme. Under the scheme, shareholders would be entitled to 4% of the share capital of MyTravel Holdings, the new holding company that would acquire the assets of MyTravel Group plc. Under the scheme, 2% of the share capital of MyTravel Holdings would be available for bondholders.”

Meanwhile, MyTravel announced that Sage Group chief executive Paul Walker is to step down as a non-executive director after four years because “he is not in a position to devote sufficient time to his responsibilities at MyTravel”.

Sam Weihagen, chief executive of MyTravel Northern Europe, is to join the group’s board.

Report by Phil Davies

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