TIDMTVZ
RNS Number : 8287U
Travelzest plc
04 January 2013
Date: 4 January 2012
On behalf Travelzest plc ("Travelzest" or the "Group")
of:
Embargoed until 7am
Travelzest plc
Preliminary results
Travelzest plc (AIM:TVZ), the online travel group, announces its
preliminary results for the year to 31 October 2012.
Highlights
-- Record total transaction value of GBP224.9 million (2011: GBP221.6 million)
-- Revenues of GBP24.1 million (2011: GBP25.4 million)
-- Operating profit from continuing operations of GBP3.5 million (2011: GBP3.7 million)
-- Underlying operating profit(1) from continuing operations
combined with the loss in respect of discontinued operations
increased by GBP1.4 million to GBP4.6 million (2011: GBP3.2
million) as a result of measures undertaken in late 2011 and early
2012 in the UK to reduce operating costs.
-- Underlying operating profit(1) from continuing operations was
GBP5.9 million (2011: GBP6.2 million)
-- The gross profit percentage increased to 81.9% (2011: 81.1%)
-- Significantly reduced operating costs
-- Continued investment in marketing, and expansion of luxury land based product offerings
-- Formal sale process continues, with bidding party negotiations on-going
Commenting on the results, Nigel Jenkins, Non-Executive Chairman
said:
"We would like to thank the team for their hard work during this
period of change for the Group, and look forward to the continued
focus on strengthening our strong Canadian operations. We believe
with a more streamlined business we can look forward with optimism
for the year ahead."
- Ends -
Enquiries:
Travelzest plc
Adrian Cobbold, Finance Director Via Redleaf Polhill
Redleaf Polhill 020 7566 6720
Rebecca Sanders-Hewett / Jenny Bahr travelzest@redleafpolhill.com
Merchant Securities Limited (Nominated Adviser
and Broker) 020 7628 2200
Simon Clements
Notes to Editors:
About Travelzest
Travelzest plc (LSE:TVZ.L) is a dynamic travel group, with a
collection of online travel retailers and specialised merchant
operators. Included in the Travelzest agency family are Travelzest
Holidays, itravel2000, The Cruise Professionals, holiday.co.uk and
flight.co.uk. Travelzest is traded on London's AIM Exchange under
the symbol TVZ.
Chairman's statement
I am pleased to report an improved Group performance over the
previous year, despite another challenging year for the travel
sector. The core Canadian businesses continued to perform strongly
with increased total transaction value and stable underlying
operating profit(1) , and the Group's restructuring process is well
under way.
In our 2011 annual report we announced we were exploring options
for the remaining UK brands that had not been sold. In late 2012,
we made the decision to sell or wind down all the remaining UK
operations. We expect this process will complete by the end of the
first fiscal quarter 2013. As a result we have shown the UK
operations as discontinued operations in the Group income
statement. On the Group balance sheet we have separately disclosed
the entities we are selling as "assets/liabilities classified as
held for sale". Following these changes, we now view the business
along geographic lines with two segments: the UK and Canada as
opposed to the Merchant and Agency segmentation used in 2011.
In March 2012, the Company updated certain terms of the credit
facility agreement in place with its primary bank. This update
provided for a reset of covenants and shortened the duration of the
credit agreement to 30 June 2013 from 31 October 2013. Since 30
April 2012, the Group has received waivers from its primary bank in
respect of the requirement to comply with the financial
covenants.
In May 2012, an independent board was created comprised of the
three non-executive directors to seek a potential buyer of the
company. Management submitted a bid as part of this process. In
October 2012, the independent board announced the closure of the
formal sale process and that the most attractive proposal was
received from a group supported by Jonathan Carroll, Chief
Executive Officer, Adrian Cobbold, Group Finance Director, and
their private equity backers to purchase the Canadian business.
Although there is no certainty that there will be a sale that is
acceptable to the independent board and shareholders, the
negotiations with the bidding party remain on-going. The sale of
the Canadian business would allow Travelzest to repay its external
bank debt and to return surplus funds to shareholders. For
prudence, the board is also reviewing alternate financing options
in the event the sale does not proceed.
Financial results
-- While recording record total transaction value of GBP224.9
million we experienced a 5.0% decline in revenues to GBP24.1
million (2011: GBP25.4 million) due to a 44.9% decline in
advertising and other revenue.
-- The gross profit percentage increased to 81.9% (2011: 81.1%)
as a result of lower promotion costs and lower commission
expense.
-- Underlying operating profit(1) from continuing operations
combined with the loss in respect of discontinued operations
increased by GBP1.4 million to GBP4.6 million (2011: GBP3.2
million) as a result of measures undertaken in late 2011 and early
2012 in the UK to reduce operating costs.
-- Underlying operating profit(1) from continuing operations was
GBP5.9 million compared with GBP6.2 million in 2011, the decline of
GBP0.3 million was primarily due to lower advertising and other
revenue.
-- Operating profit from continuing operations was stable at
GBP3.5 million (2011: GBP3.7 million).
-- The loss from the Group's discontinued operations declined
from GBP3.0 million in 2011 to GBP1.3 million in 2012 as a result
of the Group's decision to exit its UK operations.
1. Underlying operating profit is adjusted for amortisation of
intangible assets and separately disclosed items
-- The net debt position of the Company increased by GBP4.3
million to GBP15.5 million (2011: GBP11.2 million). The majority of
this increase is a result of interest payments and charges
totalling GBP4.4 million which have been paid or accrued to our
bank. These payments are in accordance with the terms of the
financing agreement with our bank, but in the view of the board are
unsustainable. In the event that the sale of the Canadian assets
does not occur, we will seek new finance or new terms for these
loans and facilities. The following table shows a reconciliation of
net debt between 2011 and 2012:
GBP000s
At 31 October 2011 11,176
Interest payments and charges 4,380
Income taxes paid 1,796
Capital expenditure 733
Finance leases (395)
Cash generated from operations (2,193)
Other 42
--------
At 31 October 2012 15,539
Outlook
Forecasts for Canadian winter travel according to the Conference
Board of Canada(2.) is for growth of 4.9%, with further growth
expected in the package holiday market for the Cuba, Dominican
Republic, Jamaica and Mexico region, and that the Canadian dollar
will remain strong.
Marketing investment will continue to be a significant focus for
the Group, with particular regard to the late booking market for
itravel2000 and our luxury offering, The Cruise Professionals,
along with an expansion of our luxury land based product
offerings.
Summary
I would like to take this opportunity to recognise the sterling
efforts of our management and employees in helping us achieve this
result and we look forward with optimism for the year ahead. We
believe a more streamlined business will allow the management team
to focus on growing our profitable Canadian operations.
N J Jenkins
Chairman
4 January 2013
2. Conference Board of Canada : Outlook for Winter 2012/13 Travel
Consolidated income statement
Re-presented*
Year to Year to
31 October 31 October
Notes 2012 2011
GBP000s GBP000s
Continuing operations
Total transaction value 2 224,927 221,568
----------- --------------
Revenue 2 24,120 25,389
Cost of sales (4,365) (4,787)
----------- --------------
Gross profit 19,755 20,602
Administrative expenses (16,299) (16,890)
----------- --------------
Operating profit 3,456 3,712
Analysed as:
-------------------------------- ------ ----------- --------------
Underlying operating
profit 5,881 6,185
Separately disclosed
items (1,620) (1,740)
Amortisation of intangible
assets (805) (733)
3,456 3,712
Finance income 450 471
Finance costs 3 (3,609) (2,767)
----------- --------------
3
Profit on ordinary activities
before taxation 297 1,416
Income tax expense 4 (602) (1,325)
----------- --------------
(Loss)/profit for the
year from continuing
operations (305) 91
Discontinued operations
Loss for the year from
discontinued operations 7 (1,325) (3,003)
----------- --------------
Loss for the year attributable
to owners of the parent (1,630) (2,912)
=========== ==============
Basic (loss)/earnings
per share
From continuing operations 5 (0.21)p 0.06p
From discontinued operations (0.91)p (2.07)p
Diluted (loss)/earnings
per share:
From continuing operations 5 (0.21)p 0.05p
From discontinued operations (0.91)p (2.07)p
*The income statement for the year to 31 October 2011 has been
re-presented to show the Group's UK operations as discontinued.
Consolidated statement of comprehensive income
Year to Year to
31 October 31 October
2012 2011
GBP000s GBP000s
Loss for the year
Other comprehensive income: (1,630) (2,912)
Currency translation differences 203 (400)
Movement in cash flow hedge 144 581
------------ ------------
Other comprehensive income, net of tax 347 181
Total comprehensive loss for the year
attributable to owners of the parent (1,283) (2,731)
============ ============
Consolidated balance sheet
Notes 31 October 31 October
2012 2011
ASSETS GBP000s GBP000s
Non-current assets
Goodwill 29,809 29,809
Intangible assets 1,643 2,145
Property, plant and equipment 1,039 1,196
Deferred tax asset 76 -
----------- -----------
32,567 33,150
Current assets
Trade and other receivables 9,182 10,119
Derivative financial instruments 173 416
Restricted cash 1,160 996
Cash and cash equivalents 1,107 1,617
Assets classified as held for
sale 7 88 -
----------- -----------
11,710 13,148
Total assets 44,277 46,298
=========== ===========
EQUITY AND LIABILITIES
Equity attributable to owners
of the parent
Share capital 2,903 2,903
Share premium account 31,456 31,456
Merger reserve 2,320 2,320
Translation and hedge reserve (1,571) (4,949)
Accumulated losses (19,784) (15,125)
----------- -----------
Total equity 15,324 16,605
Non-current liabilities
Trade and other payables 1,889 2,003
Obligations under finance leases 307 247
Deferred tax 137 221
----------- -----------
2,333 2,471
Current liabilities
Trade and other payables 9,239 11,699
Borrowings 16,110 12,423
Obligations under finance leases 229 123
Derivative financial instruments 173 932
Current tax liabilities 844 2,045
Liabilities classified as held
for sale 7 25 -
----------- -----------
26,620 27,222
----------- -----------
Total liabilities 28,953 29,693
Total equity and liabilities 44,277 46,298
=========== ===========
Consolidated cash flow statement
Year to Year to
31 October 31 October
Notes 2012 2011
GBP000s GBP000s
Cash flow from operating activities
Cash generated from operations 6 2,193 2,042
Interest paid (3,081) (1,765)
Income taxes paid (1,796) (882)
------------ ------------
Net cash used in operating activities (2,684) (605)
Cash flow from investing activities
Purchases of property, plant and equipment
and intangible assets (733) (556)
Proceeds from sale of assets 42 -
------------ ------------
Net cash used in investing activities (691) (556)
Cash flow used in financing activities
Repayment of borrowings - (2,290)
Overdraft facility drawn down 2,500 -
(Increase)/decrease in restricted cash (164) 1,930
Finance lease 395 93
Net cash used in financing activities 2,731 (267)
Net decrease in cash and cash equivalents (644) (1,428)
Cash and cash equivalents
Cash and cash equivalents at beginning
of year 1,617 2,924
Effect of foreign exchange rate changes 134 121
Net decrease in cash and cash equivalents (644) (1,428)
------------ ------------
Cash and cash equivalents at end of
year 1,107 1,617
Consolidated statement of changes in equity
Translation Share
Share and hedge premium Merger Accumulated Total
capital reserve* account reserve losses equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 31 October
2010 2,903 (5,130) 31,456 2,320 (12,749) 18,800
---------------------- -------- ------------ --------- -------- ------------ --------
Comprehensive
income:
Loss for the year - - - - (2,912) (2,912)
Other comprehensive - - - - - -
income:
Movement in cash
flow hedge - 581 - - - 581
Foreign exchange
movements - (400) - - - (400)
---------------------- -------- ------------ --------- -------- ------------ --------
Total comprehensive
income - 181 - - (2,912) (2,731)
---------------------- -------- ------------ --------- -------- ------------ --------
Transactions with
owners:
Share-based payments - - - - 536 536
Transactions with
owner: - - - - 536 536
---------------------- -------- ------------ --------- -------- ------------ --------
At 31 October
2011 2,903 (4,949) 31,456 2,320 (15,125) 16,605
---------------------- -------- ------------ --------- -------- ------------ --------
Comprehensive
income:
Loss for the year - - - - (1,630) (1,630)
Other comprehensive
income:
Movement in cash
flow hedge - 144 - - - 144
Transfers - 3,031 - - (3,031) -
Foreign exchange
movements - 203 - - - 203
---------------------- -------- ------------ --------- -------- ------------ --------
Total comprehensive
income - 3,378 - - (4,661) (1,283)
---------------------- -------- ------------ --------- -------- ------------ --------
Transactions with
owners:
Share-based payments - - - - 2 2
Transactions with
owner: - - - - 2 2
---------------------- -------- ------------ --------- -------- ------------ --------
At 31 October
2012 2,903 (1,571) 31,456 2,320 (19,784) 15,324
---------------------- -------- ------------ --------- -------- ------------ --------
* The translation and hedge reserve includes GBP1,571,000 (2011:
GBP4,805,000) relating to the cumulative impact of retranslating
foreign subsidiaries and GBPnil (2011: GBP144,000) relating to cash
flow hedges.
1. Group principal accounting policies
General information
Travelzest plc (the 'Company') and its subsidiaries (together,
the 'Group') provide retail travel sales and merchant operation
services.
The Company is a public limited company, incorporated and
domiciled in the UK and is listed on the AiM, a market operated by
the London Stock Exchange plc. The address of its registered office
is Farm Cottage, Heath House, Wedmore, Somerset, United Kingdom,
BS28 4UG.
Basis of preparation
The consolidated financial statements of Travelzest plc have
been prepared in accordance with IFRS as adopted by the European
Union, IFRIC Interpretations and the Companies Act 2006 applicable
to companies reporting under IFRS. The consolidated financial
statements have been prepared under the historical cost convention
as modified by financial assets and financial liabilities
(including derivative instruments) at fair value through profit or
loss. The financial statements have been prepared on a going
concern basis.
Going concern
The Group is currently funded by a loan and overdraft facility
as described in note 17 to the financial statements. The loan is
due to be repaid in six monthly instalments of GBP0.5m from January
2013 to May 2013 with a final payment due in June 2013. The
overdraft facility also expires in June 2013.
Under the terms of the loan, the Group is required to comply
with quarterly covenants which require the attainment of designated
ratios of total debt to EBITDA, EBITDA to interest payable and cash
flow to total debt service. During the year to 31 October 2012, the
Group obtained waivers in respect of having to comply with these
covenants.
The directors have prepared a cash flow forecast to January 2014
based on the Group's approved budget and have considered the
forecast covenant position at each of the quarterly testing points
until repayment of the loan in June 2013. In forming their view
that the business is a going concern, the Directors believe that
the repayment of the debt in June 2013 will be satisfied by
proceeds from the sale of the Group's Canadian operations or from a
new financing arrangement. They also believe that they will
continue to receive waivers in respect of the requirement to comply
with financial covenants.
There is a risk that the sale of the Canadian businesses may not
occur, entering into a new financing arrangement will be
unsuccessful and that the Group will not receive waivers from
January to June 2013 in respect of complying with its financial
covenants. These factors represent material uncertainties which may
cast significant doubt on the ability of the Group to continue as a
going concern. The directors have a reasonable expectation that a
sale of the Canadian operations will occur, that alternative
funding will be obtained if required and that they will continue to
receive covenant waivers. As such they have adopted the going
concern basis in preparing these financial statements. The
financial statements do not include the adjustments that would
result if the Group were unable to continue as a going concern.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Judgements and estimates
The preparation of the Group's financial statements in
accordance with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these estimates.
The following are critical judgements in applying the accounting
policies of the Group that have the most significant effect on the
financial statements:
Revenue
Management make critical judgements in determining when to
recognise income. The recognition is based on whether companies
within the Group are an agent or merchant. Merchant operations
revenue is primarily when the Group becomes principal on the
transaction and defines the terms of the transaction with the
consumer. Agency operations revenue is primarily when the Group
passes on to the consumer the majority of the terms of sale from
the ultimate supplier and earns a commission for completing the
transaction. Revenue is recognised when it can be measured
reliably. Revenue and direct expenses relating to tours arranged by
the Group's merchant operators are taken to the income statement on
the date of holiday departure. Revenue relating to agency
commission receivable on third party leisure travel products is
recognised when earned, which is on receipt of the full payment
from the customer; and for business travel products is recognised
when earned, which is upon booking from the customer as bookings
are ticketed immediately and are non-refundable. In all cases
recognition occurs when it is probable that the economic benefits
associated with the transaction will flow into the Group, and the
costs incurred or to be incurred can be measured reliably.
Impairment
An impairment loss is recognised for the amount by which the
cash-generating unit's carrying amount exceeds its recoverable
amount. Determining whether goodwill is impaired requires an
estimate of value in use of the cash-generating units to which
goodwill has been allocated. The value in use calculation requires
the Group to estimate future cash flows from the cash-generating
units and a suitable discount rate in order to calculate a fair
value. In the process of measuring expected future cash flows,
management makes assumptions about future performance. In most
cases, determining the applicable discount rate involves estimating
the appropriate adjustment to market risk and the appropriate
adjustment to asset-specific risk factors.
Share-based payments
Management uses valuation techniques in determining the fair
values of share-based payments at the date of grant; it adopts the
Black-Scholes pricing model for approved and unapproved options
schemes, and it adopts the Monte-Carlo Simulation pricing model for
management incentive options. Significant inputs into the
calculation include the market price at the date of grant and
exercise prices. Furthermore, the calculation takes into account
the future dividend yield, the share price volatility rate and
risk-free interest rate.
Fair value of financial instruments
Management make critical judgements both as to whether hedge
accounting can be applied and to measure the fair value of the
derivative financial instruments. Management uses active market
quotes to measure the fair value of derivative financial
instruments. The effectiveness of financial instrument hedges is
assessed by considering the underlying liability to which the hedge
relates. If the conditions for hedge accounting are no longer met
and the previously designated hedged item is measured by means of
the effective interest method, the necessary adjustment of the
carrying amount of the underlying transaction has to be effected
over its remaining term.
Deferred tax
The assessment of the probability of future taxable income in
which deferred tax assets can be utilised is based on the Group's
latest approved budget which is adjusted for significant
non-taxable income and expenses and specific limits to the use of
any unused tax loss or credit. If a positive forecast of taxable
income indicates the probable use of a deferred tax asset,
especially when it can be utilised without a time limit, that
deferred tax asset is usually recognised in full.
Litigation
Where the Group has an outstanding legal claim against it and it
is probable that an outflow will be required in settlement, an
appropriate accrual or provision is recognised in respect of the
expected settlement.
Presentation of discontinued operations
As there is no certainty that a sale of the Group's Canadian
businesses will occur these businesses and related assets and
liabilities are presented as continuing and are not classified as
held for sale.
Business combinations
Business combinations are accounted for using the purchase
method. The purchase method involves the recognition of the
acquiree's identifiable assets and liabilities, including
contingent liabilities, regardless of whether they were recorded in
the financial statements prior to acquisition. On initial
recognition, the assets and liabilities of the acquired subsidiary
are included in the consolidated financial statements at their fair
values, which are also used as the basis for subsequent measurement
in accordance with the Group's accounting policies. Any deferred
consideration in respect of the acquisition is held as a liability
until payment is due and reflected in the initial carrying value of
the subsidiary. Any subsequent changes to the amount of deferred
consideration are recognised against the liability and through the
income statement. Goodwill is stated after separating out
identifiable assets where applicable.
Goodwill and other intangible assets
Goodwill arising on acquisition represents any excess of the
fair value of the consideration given over the fair value of the
identifiable assets and liabilities acquired less any provision for
impairment. Under IFRS, goodwill is not amortised. Goodwill is
recognised as an asset, and is reviewed for impairment at least
annually or whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Any impairment is
recognised immediately in the Group's income statement and is not
subsequently reversed. The recoverable amount is the higher of an
asset's fair value less costs to sell and value in use.
Impairment tests for goodwill were conducted on the basis of
cash-generating units ("CGUs"). According to the IFRS rules, a CGU
is the smallest identifiable group of assets that generates cash
inflows from continuing use that are largely independent of the
cash inflows from other assets or groups of assets. CGUs were
established for the individual merchant operators, and for the
agency businesses, in specific countries. The expected cash flows
generated are discounted using rates that represent estimated
weighted average cost of capital for the respective business.
Goodwill arising on acquisitions before the date of transition
to IFRS has been retained at previous UK GAAP amounts subject to
being tested for impairment at that date. Goodwill written off to
reserves under UK GAAP prior to 2006 has not been reinstated and is
not included in determining any subsequent profit or loss on
disposal.
Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Customer relationships acquired in a business combination are
recognised at fair value at the acquisition date. The relationships
have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line
method over the expected life of the relationship. These have been
classified as other intangible assets.
Costs that are directly associated with the purchase and
implementation of websites and unique software by the Group are
recognised as intangible assets and are classed as website
development and computer software. Expenditures that enhance and
extend the benefits of these items and lives are recognised as a
capital improvement and added to the original cost of the website
and software. These assets are carried at cost less accumulated
amortisation and impairment, and tested annually for
impairment.
Other intangible assets (including customer relations, order
backlogs and contractual agreements) are accounted for at cost and
are amortised over their respective lives. These assets are tested
annually for impairment.
The estimated useful economic life of these assets are as
follows:
Other intangible assets - 1 to 6 years
Website development - 3 to 5 years
Computer software - 3 to 5 years
Property, plant and equipment
Property, plant and equipment are stated at cost, net of
accumulated depreciation and any provision for impairment. Cost
includes the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for its
intended use.
Depreciation is provided at the following annual rates in order
to write off each asset over its estimated useful life. The annual
rates are reviewed on an annual basis and adjusted if
appropriate.
Property improvements - 5 years
Office equipment and computer - 3 to 5 years
equipment
Motor vehicles - 3 to 5 years
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within
administrative expenses in the income statement.
Financial assets
i) Classification
The Group classifies its financial assets in the following
categories: at fair value through profit or loss, loans and
receivables, and available for sale. The classification depends on
the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at
initial recognition.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of selling
in the short-term. Derivatives are also categorised as held for
trading unless they are designated as hedges. Assets in this
category are classified as current assets. Any derivatives expected
to be settled in greater than twelve months are classified as
non-current assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date. These are
classified as non-current assets. The Group's loans and receivables
comprise trade and other receivables and cash and cash equivalents
in the balance sheet.
ii) Recognition and measurement
The Group measures its financial assets initially at fair value.
The subsequent measure depends on classification for example trade
and other receivables which are fixed price are carried at
amortised cost (if applicable) using an effective interest method
if the time value of money is significant. Due to the nature of the
businesses, credit risk is deemed low, therefore amortisation or
impairment is unlikely. Gains or losses arising from changes in the
fair value of the financial assets at fair value through profit or
loss category are presented in the income statement within finance
income or finance costs in the period in which they arise.
Financial liabilities
The Group's financial liabilities include financial liabilities
at fair value through profit or loss, borrowings, trade and other
payables and derivative financial instruments. Financial
liabilities are classified as financial liabilities measured at
amortised cost or derivatives designated as hedging
instruments.
The Group determines the classification at initial recognition
and measures initially at fair value. The subsequent measurement
depends on classification, for example financial liabilities
measured at amortised cost having been initially recognised at fair
value (in case of borrowing, fair value of proceeds net of issue
costs), are subsequently measured at amortised cost (if applicable)
using an effective interest method taking into account discounts
and issue costs. This category of financial liability includes
borrowings and trade and other payables.
Derivatives designated as hedging instruments are accounted for
in accordance with the policy set out below.
Derivative financial instruments and hedging
Derivative financial instruments are initially measured at the
fair value attributable to them on the day of the conclusion of the
agreement. The follow-up measurement is also effected at the fair
value applicable at the respective balance sheet date. The method
applied in recording profits and losses depends on whether the
derivative financial instrument is classified as a hedge, and on
the type of hedged item. As a matter of principle, the Group
classifies derivative financial instruments either as fair value
hedges to hedge exposure to changes in the fair value of assets or
liabilities or as cash flow hedges to hedge exposure to risks of
varying cash flows from highly probable future transactions.
Upon inception of the transaction, the Group documents the
hedging relationship between the hedge and the underlying item, the
risk management goal and the strategy pursued in entering into the
hedges. In addition, an assessment is made both at the beginning of
the hedge relationship and on a continual basis as to whether the
derivatives used for the hedge compensate for the changes in the
fair values or cash flows of the underlying transactions in a
highly effective manner. The Group currently has no fair value
hedges in place. Changes in the fair values of derivative financial
instruments not achieving the criteria for hedge accounting are
directly recognised in the income statement.
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows arising from a recognised asset or
liability, or a highly probable forecast transaction, the effective
part of any gain or loss on the derivative financial instrument is
recognised directly in the hedging reserve. Any ineffective portion
of the hedge is recognised immediately in the income statement.
When the forecast transaction subsequently results in the
recognition of a non-financial asset or non-financial liability,
the associated cumulative gain or loss is removed from the hedging
reserve and is included in the initial cost or other Financial
liabilities carrying amount of the non-financial asset or
liability. If a hedge of a forecast transaction subsequently
results in the recognition of financial asset or financial
liability, the associated gains and losses that were recognised
directly in equity are reclassified into the income statement in
the same period or periods during which the asset acquired or
liability assumed affects profit or loss.
For cash flow hedges, the associated cumulative gain or loss is
removed from equity and recognised in the income statement in the
same period or periods during which the hedged forecast transaction
affects in the income statement.
Prospective hedge effectiveness is performed at the commencement
of hedge accounting, and subsequently at each balance sheet date,
through comparison of the critical terms of the hedged forecast
transaction and the hedging instrument. Critical terms are the
maturity, amount and currency of the cash flows relating to the
hedging instrument and the forecast hedged transaction.
Retrospective hedge effectiveness is performed at each reporting
date principally using a dollar offset analysis, comparing the
cumulative changes in the fair values of the forecast hedged
transaction and the hedging instrument.
When a hedging instrument no longer meets the criteria for the
hedge accounting, expires or is sold, terminated or exercised, or
the entity revokes designation of the hedge relationship, hedge
accounting is discontinued prospectively. If the hedged forecast
transaction is still expected to occur, the cumulative gain or loss
at that point remains in equity and is recognised in accordance
with the above policy when the transaction occurs. If the hedged
transaction is no longer expected to take place, the cumulative
unrealised gain or loss is recognised in equity or recognised in
the income statement immediately.
Total transaction value and revenue recognition
Total transaction value, which is stated net of value added tax,
does not represent the Company's statutory revenue. Where companies
within the Group act as agent or cash collector, total transaction
value represents the price at which goods or services have been
sold to the consumer and is recognised on the same time basis as
statutory turnover.
Revenue represents the fair value of consideration receivable
from inclusive tours, agency commissions receivable and other
services supplied to customers in the ordinary course of business.
Revenue and direct expenses relating to the inclusive tours
arranged by the Group's merchant leisure travel providers are taken
to the income statement on holiday departure. Revenue relating to
agency commission receivable on third party leisure travel products
is recognised when earned, which is on receipt of the full payment
from the customer. Revenue relating to agency receivable on third
party business travel products is recognised when earned on date of
booking, which by the terms of contracts is the date the invoice is
raised and the customer becomes liable for payment under the terms
of their contract. In all cases recognition occurs when it is
probable that the economic benefits associated with the transaction
will flow into the Group, the costs incurred or to be incurred can
be measured reliably. Other revenue and associated expenses are
taken to the income statement as earned or incurred. Revenue and
expenses exclude intra-Group transactions.
Income statement presentation and separately disclosed items
Profit or loss from operations includes the results from
operating activities of the Group.
Separately disclosed items are those that are unusual because of
their size, nature or incidence which the Group's management
consider should be disclosed separately to enable a full
understanding of the Group's results. Separately disclosed items
include share-based payment charges.
Tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity,
respectively. The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at the
balance sheet date in the countries where the Company and its
subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill.
Deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax
is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled. Deferred income tax
assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Pensions
The Group pays contributions to publicly or privately
administered pension plans on a mandatory, contractual or voluntary
basis. The group has no further payment obligations once the
contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
Foreign currency
(a) Functional and presentation currency
In the Group's financial statements, all assets, liabilities and
transactions of the Group's entities are translated into sterling,
the functional currency of the parent company. Average exchange
rates are used to translate the income and expenses of all
subsidiaries that have a functional currency other than sterling
where there has been no significant fluctuation in the rate. The
balance sheets of such entities are translated at period end
exchange rates. All resulting exchange differences are recognised
as a separate component of equity. Goodwill and fair value
adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and
translated at the closing rate. On consolidation, exchange
differences arising from the translation of the net investment in
foreign operations, and of borrowings designated as hedges of such
investments, are recognised in equity.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement, except when deferred in
other comprehensive income as qualifying cash flow hedges and
qualifying net investment hedges. Foreign exchange gains and losses
that relate to cash and cash equivalents are presented in the
income statement within 'finance income, and finances cost'. All
other foreign exchange gains and losses are presented in the income
statement within 'administrative expenses'.
Non-monetary items measured at historical cost are translated
using the exchange rates at the date of transaction (not
retranslated).
Share-based payments
The Group issues share-based instruments to certain employees as
part of their total remuneration:
Share options
Share options are recorded as equity settled share-based
compensation. The fair values of these instruments are calculated
at the date of grant, using the Black-Scholes or Monte-Carlo
Simulation pricing models. Non-market vesting conditions are
included in assumptions about the number of options that are
expected to vest. The total expense is recognised in the income
statement over the vesting period, which is the period over which
all of the specified vesting conditions are to be satisfied with a
corresponding increase in equity reserves. At the end of each
reporting period, the Group revises its estimates of the number of
options that are expected to vest based on the non-market vesting
conditions. The Group recognises the impact of the revision to
original estimates, if any, in the income statement, with a
corresponding adjustment to equity. Any waivers to share-based
payments are treated as cancellations by the Group. When the
options are exercised, the Company issues new shares. The proceeds
received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when
the options are exercised.
Cash bonus award
The Group also issued a cash bonus award which is recorded as
cash settled share-based compensation. The fair value of the cash
bonus award is calculated using the Monte-Carlo Simulation pricing
model at each reporting date. The fair value is charged to the
income statement with a corresponding entry to non-current
liabilities.
Basis of consolidation
Subsidiaries are all entities (including special purpose
entities) over which the Group has the power to govern the
financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether
the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date that control
ceases.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated but considered to be an impairment
indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Equity and reserves
Share capital presents the nominal value of shares that have
been issued. Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of shares and share awards
are recognised as a deduction from equity, net of any tax
effects.
Share premium account includes any premiums received on the
issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from the share premium, net of any
related income tax benefits.
The translation and hedge reserve includes the effects of
foreign currency translation differences arising on the translation
of the Group's foreign entities and the gains and loss on financial
instruments designated as effective hedges are also included.
The Company was entitled to the merger relief offered by section
612 of the Companies Act 2006 in respect of the consideration
received in excess of the nominal value of the equity shares issued
in connection with the acquisition of Peng Travel Limited, Fair's
Fare Limited and the settlement of outstanding consideration on the
acquisition of Holiday Express Group Limited.
On acquisition, the investments in the Company's immediate
subsidiary companies were recorded in the Company's balance sheet
at the fair value of the assets acquired, with the difference
between this and the nominal value of the shares issued being
credited to a merger reserve.
Brochure and advertising costs
The costs of brochure publication and advertising including web
based advertising are charged to the income statement as
incurred.
Operating lease agreements
In accordance with IAS 17 Leases, rentals applicable to
operating leases where substantially all of the benefits and risks
of ownership remain with the lessor are charged against profits on
a straight line basis over the period of the lease.
Finance lease agreements
The Group leases certain property, plant and equipment. Leases
of property, plant and equipment where the Group has substantially
all the risks and the rewards of ownership are classified as
finance leases. Finance leases are capitalised at the lease's
commencement at the lower of the fair value of the leased property
and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and the
finance charges so as to achieve a constant rate on the finance
balance outstanding. The interest element of the finance cost is
charged to the income statement over the period of the lease so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The property, plant and
equipment acquired under finance leases are depreciated over the
shorter of the useful life of the asset and the lease term.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is the executive management, who
are responsible for allocating resources and assessing performance
of the operating segments.
Cash and cash equivalents
For the purpose of the balance sheet and cash flow statement,
cash comprises cash in hand and deposits repayable on demand, less
overdrafts payable on demand.
Restricted cash
Restricted cash relates to funds held in trust and pledged cash
for corporate credit cards and letters of credit. The Group
receives monies from customers as payment for travel services.
Prior to such amounts being paid to the travel service provider,
monies received are maintained in a trust account, which is
regulated by various Canadian provinces.
Non-current assets and liabilities held for sale
Non-current assets and liabilities of a disposal group are
classified as held for sale when their carrying amount is to be
recovered principally through a sale transaction and a sale is
considered highly probable. They are stated at the lower of
carrying amount and fair value less costs to sell.
Capital management policies and procedures
The Group's capital management objectives are:
-- to ensure the Group's ability to continue as a going concern; and
-- to provide an adequate return to shareholders
The Group monitors capital on the basis of the carrying value of
equity plus its facility loan, less cash and cash equivalents as
presented in the face of the financial statements. The Group's goal
in capital management is to operate under the Group's current
borrowing facility and associated covenants.
Impact of new International Financial Reporting Standards
adopted in the year by the Group
New International Financial Reporting Standards adopted in the
year
The following amendments to existing International Financial
Reporting Standards and new International Financial Reporting
Standards have been adopted by the group during the year with no
impact:
- IAS 24 (revised) 'Related party disclosures'
- Amendments IAS 32 Financial instruments: Presentation on classification of rights issues
- Amendment to IFRS 1, First time adoption on financial instrument disclosures
- Annual improvements 2010
- Amendment to IFRS 7, Financial instruments: Transfers of financial assets
- Amendment to IFRS 1 on hyperinflation and fixed dates
- Amendment to IFRIC 14, 'Pre-payments of a Minimum Funding Requirement'
- IFRIC 19, 'Extinguishing financial liabilities with equity instruments'
New and Amended Standards adopted by the European Union but not
yet adopted by the Group
The following new and amended standards and interpretations are
required to be implemented for the financial years ended from 31
October 2012 onwards:
- Amendment to IAS 12,'Income taxes' on deferred tax
- Amendment to IAS 1,'Presentation of financial statements' on OCI
- IFRS 10, 'Consolidated financial statements'
- IFRS 11, 'Joint arrangements'
- IFRS 12, 'Disclosures of interests in other entities'
- IFRS 13, 'Fair value measurement'
- IAS 19 (revised 2011) 'Employee benefits'
- IAS 27 (revised 2011) 'Separate financial statements'
- IAS 28 (revised 2011) 'Associates and joint ventures'
- Amendment to IFRS 1,'First time adoption' on government grants
- Amendments to IFRS 7 on Financial instruments asset and liability offsetting
- Annual improvements 2011
- IFRIC 20 'Stripping costs in the production phase of a surface mine'
Management is currently reviewing these new and amended
standards and the impact on the Group's financial statements.
2. Segment reporting
Management has determined the reportable operating segments
based on the information which is reviewed by the executive
management, which is considered to be the chief operating decision
maker. The executive management considers the business segments to
be the Groups Canadian and UK operations. In addition, certain
central costs are monitored separately. In the previous year the
Group considered its segments to be its merchant and agency
operations and as such the comparative information in the segmental
information below has been re-presented to reflect the new
segmentation. The entire UK operations have been classified as
discontinued operations in the current year and comparatives
restated.
All revenues in 2012 and 2011 are in respect of sales of
holidays to external customers. The group is not reliant on any one
major customer (2011: none).
The segment information provided to the executive management for
the year ended 31 October 2012 is as follows:
Business segments Canada Total
Year to 31 Year to 31 October
October
2012 2011 2012 2011
GBP000s GBP000s GBP000s GBP000s
Revenue 24,120 25,389 24,120 25,389
--------- --------- ----------- ---------
Results
Profit from operations before
depreciation and amortisation 7,094 7,419 7,094 7,419
Depreciation (317) (254) (317) (254)
Amortisation of intangible
assets (804) (726) (804) (726)
--------- --------- ----------- ---------
5,973 6,439 5,973 6,439
Separately disclosed items (1,075) (1,430) (1,075) (1,430)
--------- --------- ----------- ---------
4,898 5,009 4,898 5,009
========= ========= =========== =========
Central costs - separately
disclosed items (545) (310)
Central costs - other* (897) (987)
----------- ---------
Operating profit 3,456 3,712
Finance income 450 471
Finance costs (3,609) (2,767)
----------- ---------
Profit before tax 297 1,416
Income tax expense (602) (1,325)
----------- ---------
(Loss)/ profit for the year (305) 91
=========== =========
*Included within central costs is GBP3,000 of depreciation and
GBP1,000 of amortisation (2011: GBP8,000 and GBP7,000
respectively).
During the year Canada spent GBP727,000 and central operations
spent GBPnil on capital expenditures (2011: GBP552,000 and GBP2,000
respectively).
Total transaction 2012 2011
value
GBP000s GBP000s
Canada 224,927 221,568
------- -------
224,927 221,568
======= =======
UK Canada Total
31 October 31 October 31 October
2012 2011 2012 2011 2012 2011
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Segment assets 878 3,594 43,340 42,704 44,218 46,298
Unallocated corporate - - - - 59 -
assets
--------- -------- ----------- -------- --------- ---------
Consolidated assets 878 3,594 43,340 42,704 44,277 46,298
Segment liabilities (2,061) (7,947) (10,203) (7,853) (12,264) (15,800)
Unallocated corporate
liabilities - - - - (16,689) (13,893)
--------- -------- ----------- -------- --------- ---------
Consolidated liabilities (2,061) (7,947) (10,203) (7,853) (28,953) (29,693)
--------- ---------
Net assets 15,324 16,605
========= =========
UK operations include assets classified as held for sale of
GBP88,000 (2011: GBPnil) and liabilities classified as held for
sale of GBP25,000 (2011: GBPnil).
3. Finance income and costs
2012 2011
GBP000s GBP000s
Interest from interest rate hedges 450 471
------- -------
Finance income 450 471
Bank interest expense (1,349) (1,718)
Bank fees (1,515) (250)
Expense from interest rate hedges (79) (212)
Other financing costs (666) (587)
------- -------
Finance costs (3,609) (2,767)
------- -------
Total (3,159) (2,296)
======= =======
The expenses arising from interest rate hedges relates to the
ineffective element of a basis points swap. Income arising from
interest rate hedges reflects the overall credit from effective
Canadian dollar and sterling interest rate swaps. Other financing
costs were incurred in the renewal of the Company's banking
facility.
4. Income tax expense
Tax expense comprises:
Re-presented
2012 2011
GBP000s GBP000s
Current income taxes:
UK corporation tax - -
Overseas taxation 762 1,581
--------- -------------
Total current income tax 762 1,581
Origination and reversal of temporary differences (163) (213)
Adjustments in respect of prior years 3 (43)
--------- -------------
Total deferred tax (160) (256)
--------- -------------
Income tax expense 602 1,325
--------- -------------
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the standard rate of
taxation in the UK of 26.80% (2011: 26.83%) as follows:
Re-presented
2012 2011
GBP000s GBP000s
Profit on ordinary activities before taxation 297 1,416
--------- -------------
Expected income tax at 26.80% (2011: 26.83%) 80 380
Amortisation and impairment - 222
Prior year taxable expense not previously recognised (455) -
Tax losses for which no deferred income tax
was recognised 862 443
Unutilised foreign tax credits 133 101
Overseas rate differences (10) 176
Expenses not deductible for tax purposes (8) 63
Share options - (60)
--------- -------------
Income tax expense 602 1,325
--------- -------------
No current or deferred tax has been charged or credited to other
comprehensive income in 2012 (2011: GBPnil). Deferred tax of GBPnil
has been credited to equity (2011: GBPnil).
A number of changes to the UK Corporation tax system were
announced in the June 2010 Budget Statement. The Finance (No 2) Act
2010, which was substantively enacted on 20 July 2010, includes
legislation reducing the main rate of corporation tax from 28% to
27% from 1 April 2011. In the March 2012 Budget Statement, a
further reduction of 2% to 25% from 1 April 2012 was announced with
further reductions to the main rate proposed to reduce the rate by
1% per annum thereafter to 22% from 1 April 2014. These further
changes had not been substantively enacted at the balance sheet
date and, therefore, are not included in these financial
statements. The overall impact is not expected to be material to
these financial statements. In addition to the changes in rates of
Corporation tax disclosed above a number of further changes to the
UK Corporation tax system were announced in the March 2012 UK
Budget Statement. These include a further reduction to the main
rate which is proposed to reduce the rate to 22% from 1 April
2014. These further changes had not been substantively enacted
at the balance sheet date and, therefore, are not included in these
financial statements. The proposed reduction of the main rate of
corporation tax to 22% from 1 April 2014 is expected to be enacted
separately.
5. Earnings per share
Loss per share
The basic loss per share from continuing operations of 0.21p
(2011: 0.06p earnings per share) is based on a loss of GBP305,000
(2011: earnings of GBP91,000) and the basic loss per share from
discontinued operations of 0.91p (2011: 2.07p loss per share) is
based on a loss of GBP1,325,000 (2011: GBP3,003,000) and
145,136,110 (2011: 145,136,110) shares of 2p, being the average
number of shares in issue during the year.
The number of potentially dilutive instruments outstanding are
set out in the following table:
2012 2011
Employee option scheme #1 25,300 104,040
Employee option scheme #2 4,166,670 4,500,004
Management incentive plan 16,366,865 28,586,984
----------- -----------
20,558,835 33,191,028
----------- -----------
Warrants 5,247,000 5,247,000
----------- -----------
As the Group made a loss during the current and prior year, the
impact of potential ordinary shares is anti-dilutive and therefore
the diluted loss per share is the same as the basic loss per share
at 0.21p and 0.91p for continuing and discounted operations
respectively. Fully diluted earnings per share from continuing
operations of 0.05p for 2011 is based on earnings of GBP91,000 and
176,342,205 fully diluted weighted average number of shares
outstanding. As discontinued operations made a loss in the prior
year, the impact of potential ordinary shares is anti-dilutive and
therefore the dilutive loss per share is the same as the basic loss
per share at 2.07p.
6. Notes to the cash flow statement
The cash flow statement shows the flow of cash and cash
equivalents on the basis of a separate presentation of cash inflows
and outflows from operating, investing and financing
activities.
Reconciliation of operating profit to net cash inflow from
operating activities
Re-presented
2012 2011
GBP000s GBP000s
Operating profit 2,111 691
Amortisation 894 828
Depreciation 373 327
Change in inventories - 18
Change in operating receivables 906 (2,773)
Share-based payments (68) 588
Change in derivative - 40
Change in operating payables (2,106) 2,319
Gain on sale of assets (42) -
Loss on disposal of property, plant
and equipment and 125 4
intangible assets
-------- -------------
2,193 2,042
-------- -------------
7. Non-current assets held for sale and discontinued
operations
The Group's entire UK operations are classified as discontinued
operations in 2012 and comparatives have been restated. The
associated assets and liabilities of businesses that will be sold
rather than liquidated as at 31 October 2012 have been presented as
held for sale.
Group 2012 2011
GBP000s GBP000s
Operating cash flows (1,353) (3,838)
Investing cash flows 36 (109)
-------- --------
Total cash flows (1,317) (3,947)
-------- --------
Assets classified as held for sale
2012 2011
GBP000s GBP000s
Property, plant and equipment 2 -
Other current assets 86 -
-------- --------
Total 88 -
-------- --------
Liabilities classified as held for sale
2012 2011
GBP000s GBP000s
Trade and other payables 19 -
Other current liabilities 6 -
-------- --------
Total 25 -
-------- --------
The cash balance pertaining to entities classified as held for
sale that will not be sold along with the remaining entities is
GBP193,000 and is included within cash and cash equivalents on the
consolidated balance sheet.
Analysis of the result of discontinued operations is as
follows:
2012 2011
GBP000s GBP000s
Revenue 8,153 12,295
Expenses (9,499) (15,316)
------- --------
Loss before tax of discontinued operations (1,346) (3,021)
Income tax credit 21 18
------- --------
Loss for the year from discontinued operations (1,325) (3,003)
------- --------
8. Re-presentation of the 2011 consolidated balance sheet
The 2011 consolidated balance sheet has been re-presented to
reclassify travel supplier payables of GBP2,568,000 from trade
receivables to trade payables.
.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSFSILFDSELF
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