Western & Oriental edges into the black
Specialist luxury travel group Western & Oriental edged into profit for the half-year ending March 31.
Losses of £2 million a year ago were turned into a pre-tax profit of £100,000.
The turn around in the seasonally weaker winter period was put down to "early and decisive action" on the cost base and integration process.
Revenue for the half year was down to £28.4 million from £29.2 million a year earlier, excluding discontinued German businesses, the company said.
The value of forward sales stood at £18.9 million at March 31, down 26.4% from £25.6 million from the same time in 2008, mainly due to customers booking significantly later.
Forward bookings have reduced from an average of over 18 weeks in advance to approximately 10 weeks.
"That lack of visibility, especially for the key summer months, does make planning more difficult," the company said.
The recession and the weakness of sterling against the US dollar and the euro all impacted on the first half results.
"We are therefore delighted with the materially improved result compared with last year. However, these factors continue to have a drag on the overall travel industry and we therefore approach the second half of the 2009 financial year with caution," a first-half statement said.
"The original buy and build strategy continues to remain on hold in this difficult economic market. However, at some point in the downturn opportunities may arise which could warrant consideration."
The swine flu outbreak had a "minimal impact" on the small number of our customers that were resident in Mexico and future bookings to this destination have been substituted to alternative destinations.
"Sales continue at an acceptable level and whilst the market is very competitive, gross margins remain within management expectations.
"Costs are being continually reviewed and are expected to show significant reductions year-on-year. It is these factors that lead us to be optimistic for the year as a whole."
Chairman David Howell said: "Despite the very challenging economic environment, revenue for the first half of the financial year remained in line with management"s expectations.
"Gross profit margins are significantly ahead of expectations and overall costs are below expectations with further savings to come in the second half of the year.
"This combination delivers a result materially ahead of management expectations and a net profit before tax for our seasonally weaker first half of the year.
"While the board continues to remain cautious in relation to the economy generally, this result leaves us well placed for the seasonally stronger second half of the financial year."
Detailing the half-year results, he said that tour operating revenue reduced from £21.7 million to £16.5 million.
This reflected the effect of the closure of the German operations in September 2008 (£1.4 million), a weaker North American ski season and a reduction in the overall number of properties offered.
"The focus during this period has been on the profitability of sales rather than the volume generated," Howell said.
Conference and incentive revenue rose from £8.9 million to £11.9 million on a like-for-like comparison.
"This sharp increase is mainly driven by new customers and increased sales to the pharmaceutical sector," said Howell.
The group has consolidated the conference and incentive division to a single brand (W&O Events) and management structure which will also bring cost and revenue benefits in the second half of the financial year.
Gross margins improved from 15.9% to 16.8%, "partly driven by tight management of any foreign exchange exposure that is created by sales and partly by the product teams ensuring that we receive best rates from our suppliers in these difficult economic times," he added.
The integration of 12 businesses acquired between March 2006 and December 2007 was described as being now "largely complete".
by Phil Davies
Thursday, May 21, 2009