For Immediate Release: 2 December 2002 ANNOUNCES PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2002 ( HBR ), the provider of specialist holidays, today announces its Preliminary results for the year ended 30 September 2002. Highlights Group turnover and profits reach record levels: Turnover 218.7m up 13.6% PBT 27.1m up 13.7% EPS 42.5p up 11.6% Full year dividend of 20.0p per share increased by 11.1% Camping Division: Sales : 109.2m - up by 5% Acquisition of Eurosites from MyTravel for 29.9m o Outperformed the mass market air package holiday companies o Increasing range and capacity of mobile-home accommodation to satisfy growing demand Hotel Breaks: Sales: 76.9m - up by 33% Consumer demand buoyant and capacity plentiful Significant margin improvement Rapid growth in online demand Successful launch of accommodation only European Cities programme Adventure Holidays: Sales: 32.6m - up by 5 % Resilient performance in difficult market conditions Strong recovery from major set back post 9/11 Appointment of new Chairman: Robert Ayling, former BA Chief Executive, will replace Angus Crichton-Miller as Chairman in June 2003 and will join the board as a Non-Executive Director in February 2003 Commenting on the results, Angus Crichton-Miller Chairman of Holidaybreak, said: Holidaybreak has had another excellent year when many of our competitors have struggled. The acquisition of Eurosites further establishes Holidaybreak as the leading operator within this resilient and profitable sector and demonstrates both the innate strength of the businesses and a stable management team. Further profitable progress should continue into 2003. For further information, please contact: Richard Atkinson, CEO On 02.11.02: 020 7466 5000 Holidaybreak 01606 787100 Tim Anderson /Louise Bolton Buchanan Communications 020 7466 5000 2 December 2002 1
Preliminary Results for the Year to 30 September 2002 CHAIRMAN S STATEMENT Holidaybreak has had another excellent year. Profits and turnover have reached record levels, with the increases coming almost entirely from organic growth. Substantial cash has been generated and we have made an important addition to our core Camping business. In the year to September 30 th 2002, profits before goodwill amortisation, impairment and tax rose by 13.7% to 27.1m on turnover of 218.7m, up 13.6%. There were no exceptional items. Headline earnings per share rose 11.6% to 42.5p and the proposed final dividend would result in an overall annual dividend of 20.0p (up 11.1%). Net debt, before the cost of acquiring Eurosites, was reduced by 21.8m. DIVIDEND The Board is recommending a final dividend of 14.1p, payable on April 21st 2003, to shareholders on the register on March 21st 2003, making a total of 20.0p for the year. Dividend cover will be 2.1 times, in line with our policy of maintaining approximately two times cover. THE DIVISIONS Each of our three divisions can look back on 2002 with a good deal of satisfaction. In a difficult year for many overseas holiday companies, Camping has outperformed the mass market air package operators. Hotel Breaks has built on an excellent result in 2001 with further rapid growth in 2002 and the Adventure Division has increased revenues and remained profitable despite a major setback post-september 11 th. Camping Division The UK market for overseas camping and mobile-home holidays proved extremely resilient in 2002. Consumer sentiment was weaker in European markets, particularly Germany, but with continuing trends away from tented accommodation to higher value mobile-homes, sales increased by 5% and margins also showed a slight improvement. Hotel Breaks Division Hotel Breaks benefited from buoyant UK consumer demand and plentiful capacity to record a 33% revenue uplift. The major driver was a further substantial increase in on-line internet demand, although sales through all other distribution channels also moved ahead. This, together with significant economies of scale, resulted in an improvement in margins and very strong profits growth. 2 December 2002 2
Adventure Division Our two Adventure businesses, Explore Worldwide and Regal Diving, suffered immediate and significant fall-out from the New York terrorist attacks. Customers postponed or cancelled holidays in large numbers, popular destinations were off limits and the scheduled airline sector was thrown into crisis with a knock-on effect on many tour companies. Our own sales recovered strongly as the year progressed and revenues eventually finished a creditable 5% up on 2001. However, margins were affected by reduced tour load factors and a higher overhead ratio which were a consequence of the postponements, cancellations and airline problems referred to above. ACQUISITION OF EUROSITES We announced the acquisition of Eurosites, the camping and mobile-home operator, from MyTravel plc on September 30 th of this year for a total consideration of 29.9m. Our investment in this resilient and profitable sector of the holiday market, which we know well, is expected to provide attractive returns as well as significant strategic benefits. To date, integration of the two businesses is proceeding according to plan but Eurosites continues to trade as a separate brand. CURRENT TRADING AND PROSPECTS With such a strong weighting towards the summer period, it is too early to forecast with confidence the eventual outcome for our various businesses in the current year. Moreover, customers now book their holidays later than ever unless incentivised by unrealistic prices or no deposit deals, strategies which make no sense for the sectors in which we operate. The current experience of our year round businesses, Hotel Breaks and Adventure, is that underlying demand is strong but late in coming through. Summer 2003 sales to date for the newly enlarged Camping Division are 3% below 2002 equivalents, a satisfactory figure given the market context and, in the case of Eurosites, acquisition linked issues. We anticipate an improvement in performance as full integration of the business takes effect and availability tightens. Hotel Breaks revenues for the year, including forward bookings, are 33% better than 2002. The outlook once again looks favourable with another excellent performance in prospect, although the rate of year on year increase is unlikely to be sustained. Internet linked growth, whilst still extremely strong, is slowing and bookings in the early weeks of the 2002 campaign were held back by the effects of September 11 th. Prospects for 2003 are enhanced by the expansion of our accommodation only European Cities programme which was successfully launched last year. Adventure s revenues are 40% ahead of the 2002 equivalents although the year on year comparison is inevitably flattered by the post-september 11 th disruption in autumn 2001. However, there is very strong underlying demand for this type of holiday and we are confident that the business will grow strongly this year. 2 December 2002 3
STRATEGY Holidaybreak has grown and prospered in recent years through steady organic growth supplemented by carefully selected acquisitions. We will continue to pursue this strategy. We see good prospects for all our divisions. Hotel Breaks and Adventure are aiming to consolidate existing market leader positions and will continue their current programmes of product and sales channel development which are key growth drivers in both businesses. In Camping, our principal focus will be on increasing the range and capacity of mobile-home accommodation to satisfy growing demand whilst increasingly targeting UK customers from the wider self-catering sector. The acquisition of Eurosites has substantially increased the size of our mobile-home fleet and has also provided us with the opportunity to achieve operational efficiencies and economies of scale. In our continental markets, where (unlike the UK) there is established demand for more budget style camping holidays, we are launching a new product which will offer accommodation in camp-site owned mobilehomes. Amongst the numerous acquisition opportunities which have been presented to us in recent years only a few have, in our view, offered the strategic and financial value that we seek. Future acquisitions will most likely be integrated into one of our three existing divisions. However, we are also prepared to acquire a travel or travel related business which would form a separate division within the Group, as was the case when we purchased Superbreak in 1995 and Explore Worldwide in 2000. NON-EXECUTIVE DIRECTORS James Wallace joined the Board as a non-executive director on May 1 st 2002, replacing Peter Folkman. He has assumed chairmanship of the Audit Committee and has already made a valuable contribution. Peter Folkman gave able service during his for four and a half years membership of the Board, a period of substantial progress for the Group. My second three year term as Chairman expires at the end of May 2003 and, as had always been planned, I will be stepping down from the position and the Board on that date. My successor will be Robert Ayling, former chief executive of British Airways. He will join the Board as a non-executive director and Chairman Designate on February 1st 2003. We are delighted that he has agreed to join Holidaybreak and are looking forward to working with him and benefiting from his expertise. EMPLOYEES As ever, our 771 permanent employees, spread across seven countries, have proved an indispensable resource for the continuing success of the business. I take this opportunity to thank all for their continuing vital contribution to the Holidaybreak group. 2 December 2002 4
IN CONCLUSION We have recorded another excellent performance and achieved a further significant increase in shareholder value, in a year in which many holiday businesses have struggled. This demonstrates both the innate strength of the businesses and the quality of a stable management team. Further profitable progress should be made in 2003 and, supported by the strong cash generating characteristics of the group, longer term prospects remain excellent. Angus Crichton-Miller Chairman 2 December 2002 5
FINANCE DIRECTOR S REVIEW In the year to 30 September 2002 showed a strong financial performance in all its activities and the Group achieved increases in profit before goodwill amortisation, impairment and tax and earnings per share of 13.7% and 11.6% respectively. At the end of the year, the Group invested 29.9m in the Camping division with the acquisition of Eurosites. The continued underlying trend of growing profitability and strong operational cash flows of all our businesses will enable us rapidly to pay down debt and rebuild interest cover. GROUP PROFIT AND LOSS ACCOUNT Turnover in 2002 was up 14% on 2001 at 218.7m (2001 192.5m). Operating profit before amortisation and impairment of goodwill increased by 9% to 29.2m (2001 26.7m). Headline earnings per share, stated before amortisation and impairment of goodwill, were 42.5p per share, an increase of 11.6 % over 2001 (38.1p). The interest charge of 2.1m (2001 2.9m) was down significantly as the Group benefited from the strong operating cash flow of all its businesses. Interest cover increased from 8.6 times in 2001 to 12.3 times in 2002. The Group s tax charge, including full provision for deferred tax, was 7.1m and the tax rate was the same as 2001 (30%). The proposed final dividend of 14.1p per ordinary share represents an increase of 12% over 2001 and gives a total dividend for the year of 20.0p per ordinary share (2001: 18.0p). Our policy is to increase dividends whilst maintaining dividend cover at over 2 times. DIVISIONAL RESULTS Camping Division Sales were up by 5% to 109.2m (2001 103.7m). Operating margin improved to 17.4% (2001: 17.2%) and operating profits were 6% higher at 19.0m (2001: 17.8m). Hotel Breaks Revenues were 33% higher at 76.9m ( 57.8m). Operating margin improved to 10.2% (2001: 9.5%) and operating profits increased by 43% to 7.8m (2001 5.5m). Adventure Division Recovered from the impact of September 11 th and sales at 32.6m were 5.1% higher than 2001 ( 31.0m). However, operating margin fell to 7.2% (2001 10.9%). As a result operating profit for the division was down by 28.5% to 2.4m ( 3.4m). 2 December 2002 6
ACQUISITIONS On 30 September 2002 we completed the acquisition of Eurosites from MyTravel plc. This acquisition, completed on the final day of the year did not impact the trading results of the Group. The total consideration of 29.9m was financed entirely from debt. During the year our Hotel Breaks Division acquired the Crystal Britain programme from TUI (UK), for a nominal cash consideration. At the time of the acquisition of Eurosites, we negotiated new facilities with our principal banks including 115m of Medium Term Loans and Revolving Credit Facilities to finance the Eurosites acquisition and its working capital requirements. BALANCE SHEET Net assets of the Group increased to 37.1m (2001: 28.0m). Net debt gearing at 30 September 2002 was 87.3% compared to 89.5% at the previous year end. Prior to the acquisition of Eurosites on 30 September, net debt was approximately 3.3m, a reduction of 21.8m, reflecting the strong operating cash flow of our businesses. Investments of 3.2m (2001: 1.9m) include shares in the Company purchased by the wholly owned subsidiary, Holidaybreak Trustee Limited, in respect of the company s various share option and share award schemes. Full details of all such schemes will be included in the Annual Report and Accounts. CAPITAL EXPENDITURE Net capital expenditure in the year to 30 September 2002 was 15.1m (2001: 15.6m). The majority of this was accounted for by the Camping Division but Adventure invested 1.7m for the purchase of the freehold of their previously leased office premises. The Camping Division spent a total of 12.6m on mobile homes, tents and camping equipment. Mobile homes at 8.7m accounted for the bulk of expenditure with capacity growing by 7%. In addition, the acquisition of Eurosites added another 2,770 mobile homes to the fleet. Disposal proceeds in respect of mobile homes sold at the end of their useful life were 2.0m. Overall sales achieved net book value. The Group s depreciation policy is to write-down the cost of mobile homes to an estimated residual value over their projected economic life, usually six seasons. In order to extend this economic life, we are sourcing units of higher specification from European manufacturers and introducing a refurbishment programme for existing units. The number of units for replacement, including Eurosites units, will increase in 2003 and hence we expect an increased level of capital expenditure in the year ended 30 September 2003. 2 December 2002 7
CASH FLOW The Group s net borrowings at 30 September 2002 were 32.4m, compared with 25.1m in 2001. This included the cash outflow of 31.0m in respect of acquisitions. Cash flow from our operating activities was 54.0m, another very strong performance. Following the Eurosites acquisition, available bank facilities are now 140.0m and are sufficient to meet the working capital, investment and bonding requirements of the Group. In addition to these facilities we entered into hire purchase agreements with various UK financial institutions to finance the purchase of mobile-homes. CAPTIVE INSURANCE Following the collapse of Independent Insurance plc in 2001 and a subsequent substantial increase in insurance premiums, the Group has established a Captive Insurance subsidiary to underwrite the property damage and business interruption risk arising from incidents of storm, tempest and flood for our camping assets in Europe. All other insurance is underwritten by third-party insurance companies. FOREIGN CURRENCY AND INTEREST RATE RISK MANAGEMENT The Group s transactional foreign currency exposures arise from the sales of holidays in overseas markets and the costs of operating overseas, particularly accommodation and travel. Currency revenues, principally Euros and US Dollars, represent approximately 19% of total Group revenues. Currency outflows account for 29% of all Group costs. The Group s policy is to hedge all currency exposures and we have entered into forward contracts to hedge all our expected trading cash flows for the next twelve months. The Group s exposure to interest rate fluctuations on its borrowings is managed by using interest rate swaps and forward contracts. At 30 September 2002, the proportion of the Group s gross borrowings at fixed and capped rates was 47% and the average rate was 6.47%. The gross cash position was fully floating. The Group incurred no material costs arising from the introduction of the single European currency. UK entry into the single currency, the timing and likelihood of which continues to remain uncertain, would benefit the Group by eradicating significant currency exposures and reducing transaction costs. Robert Baddeley Finance Director 2 December 2002 8
Consolidated profit and loss account Year ended 30 September 2002 2002 2001 000 000 Turnover 218,748 192,489 Cost of sales (156,123) (136,485) Gross profit 62,625 56,004 Net operating expenses (36,471) (31,496) Operating profit before goodwill amortisation, 29,182 26,674 impairment and exceptional costs Goodwill amortisation (1,683) (1,703) Goodwill impairment (1,345) - Exceptional costs - (463) Operating profit 26,154 24,508 Investment income 443 725 Interest payable and similar charges (2,566) (3,590) Profit on ordinary activities before taxation 24,031 21,643 Tax on profit on ordinary activities (7,120) (6,289) Profit on ordinary activities after taxation 16,911 15,354 Dividends paid and proposed (9,295) (8,343) Retained profit for the year 7,616 7,011 Earnings per ordinary share Headline earnings per ordinary share Basic earnings per ordinary share Diluted headline earnings per ordinary share Diluted basic earnings per ordinary share 42.5p 36.5p 41.5p 35.7p 38.1p 33.4p 37.5p 32.8p Dividend per ordinary share: Interim 5.9p 5.4p Final 14.1p 12.6p Total 20.0p 18.0p Consolidated statement of total recognised gains and losses Year ended 30 September 2002 2002 2001 000 000 Profit for the financial year 16,911 15,354 Gain / (loss) on foreign currency translation 14 (52) Total gains and losses recognised since last annual report 16,925 15,302 2 December 2002 9
Consolidated balance sheet 30 September 2002 2002 000 2001 000 Fixed assets Intangible assets 45,396 31,600 Tangible assets 72,034 57,728 Investments 3,191 1,896 120,621 91,224 Current assets Assets held for disposal 2,365 2,626 Debtors 15,462 13,421 Cash at bank and in hand 61,854 49,169 79,681 65,216 Creditors: amounts falling due within one year (75,446) (61,925) Net current assets 4,235 3,291 Total assets less current liabilities 124,856 94,515 Creditors: amounts falling due after more than one year (81,799) (60,499) Provisions for liabilities and charges (5,962) (6,022) Net assets 37,095 27,994 Capital and reserves Called up share capital 2,350 2,317 Share premium account 31,911 28,728 Other reserves 87 87 Profit and loss account 2,747 (3,138) Equity shareholders funds 37,095 27,994 2 December 2002 10
Consolidated cash flow statement Year ended 30 September 2002 2002 2002 2001 2001 000 000 000 000 Net cash inflow from operating activities 54,018 39,684 Returns on investments and servicing of finance Interest and other investment income received 560 725 Interest paid (1,626) (1,772) Interest element of hire purchase payments (1,151) (1,445) (2,217) (2,492) Taxation UK corporation tax (5,888) (6,482) Overseas tax paid (1,145) (1,118) (7,033) (7,600) Capital expenditure Purchase of own shares (695) (822) Sale of other investments - 5 Purchase to acquire tangible fixed assets (9,201) (9,839) Receipts from sale of tangible fixed assets 2,021 2,936 (7,875) (7,720) Acquisitions and disposals Purchase of business and subsidiary undertakings (net of cash acquired) (31,032) - (31,032) - Equity dividends paid (8,501) (7,639) Cash (outflow) / inflow before financing (2,640) 14,233 Financing Issue of ordinary share capital 1,471 1,122 New loans 27,945 - Repayment of borrowings (6,000) (8,500) Capital element of hire purchase payments (6,727) (7,213) 16,689 (14,591) Increase / (decrease) in cash in the year 14,049 (358) 2 December 2002 11
NOTES 1. Segment information 2002 000 2001 000 Group turnover by geographical origin was as follows: United Kingdom 176,692 151,573 Ireland 8,023 7,416 Netherlands and Belgium 16,012 15,659 Germany, Switzerland and Austria 14,191 13,650 Others 3,830 4,191 218,748 192,489 Group turnover and operating profit before goodwill amortisation, impairment and exceptional operating costs by class of business was as follows: Turnover Operating profit before goodwill amortisation, impairment and exceptional operating costs 2002 2001 2002 2001 000 000 000 000 Camping holidays 109,194 103,691 18,963 17,833 Hotel breaks 76,941 57,768 7,805 5,466 Adventure holidays 32,613 31,030 2,414 3,375 2. Dividends paid and proposed on equity dividends 218,748 192,489 29,182 26,674 2002 2001 000 000 Under provision in respect of final dividend 43 13 Interim dividend paid of 5.9p per ordinary share (2001-5.4p) 2,768 2,497 Final dividend proposed of 14.1p per ordinary share (2001-12.6p) 6,627 5,833 Dividends paid and proposed in respect of investment in own shares (143) - 9,295 8,343 If approved by shareholders, the proposed final ordinary dividend will be paid on 21 April 2003 to those ordinary shareholders on the register on 21 March 2003 and will absorb 6,520,000. 2 December 2002 12
3. Reconciliation of operating profit to operating cash flow 2002 2001 000 000 Operating profit 26,154 24,508 Depreciation charges and amortisation and impairment of goodwill 16,198 13,397 Non-cash fair value adjustment to goodwill - (550) Increase in debtors (1,609) (414) Increase in creditors 13,275 2,743 Net cash inflow from operating activities 54,018 39,684 4. Reconciliation of net debt 2002 2001 000 000 Increase / (decrease) in cash in the year 14,049 (358) Cash (inflow) / outflow from (increase) / decrease in debt and lease financing (15,218) 15,713 Change in net debt resulting from cash flows (1,169) 15,355 New hire purchase contracts (6,161) (8,217) Net debt at beginning of year (25,065) (32,203) Net debt at end of year (32,395) (25,065) 5. Non-statutory accounts The results set out in this announcement are non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. The results for the year ended 30 September 2002 are extracts from the 2002 Group accounts which, if adopted by the members in General Meeting on 11 February 2003 will be filed with the Registrar of Companies. These have been audited and reported upon without qualification. The results for the year ended 30 September 2001 are extracts from the 2001 Group statutory accounts, as filed with the Registrar of Companies. These were audited and reported upon without qualification. 2 December 2002 13