David Crossland: demand slackened.
INCREASED first-half losses caused by trading difficulties in Scandinavia sliced 6% off the share value of UK holiday
operator Airtours yesterday.
The company, which now generates only half of its turnover from Britain, said its usual interim pre-tax loss for the six months to March 31 widened from #12.7m last time to #23.2m. Although this was towards the lower end of analysts' expectations, which ranged from losses of #20m to #28m, the market pushed shares in Airtours 35p lower to 486.5p.
Dealers said the knock on the share price was related to the company's problems in Scandinavia. The Airtours subsidiary Scandinavian Leisure Group (SLG) suffered a first-half loss of #7.7m, compared to profits of #4.5m in the same period last year.
Chairman David Crossland said although Scandinavian business volumes had been maintained, margins were forced lower as demand slackened at the end of last summer and throughout the winter season. Although summer 1998 bookings are 5% ahead of last year, overcapacity is continuing to force more discounted sales and margin erosion.
In addition, problems at Scandinavian airline Premiair cost
Airtours #8m in the form of compensation payments to passengers and knock-on effects from flight delays. The company believes it has now addressed these problems by hiring Denmark's FLS
Industries to provide aviation engineering, although this did result in initial set-up costs.
The company's business is heavily weighted towards the second half of the year, when revenues rise with the onset of the traditional summer holiday season. As a token of this confidence, the board of directors raised the interim
dividend by 13% to 1.5p per share.
In the UK, where the Airtours brand accounts for about 15% of the package holiday market, demand was said to be strong as capacity remained under control. Bookings for summer 1998 by the UK operation are 8% ahead of last year, and winter bookings are up 4%.
Initial bookings for summer 1999 were ''encouraging'',
Crossland added.
In North America, the Canadian business was said to be encountering better trading conditions than at any other time since Airtours entered that market. While newly-acquired operations in California experienced mixed fortunes, a rationalisation of North American reservation systems should reduce overhead costs and introduce stronger operational controls.
Airtours remains bullish about Germany, where it spent #17.2m for a 29% stake in tour operator FTi. Bookings throughout Western Europe for summer 1998 are 12% up on last year.
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