Rival operators Airtours and Thomson Holidays revealed six weeks ago just how badly a year that began with such high hopes has ended.
First Choice had to contend with extra costs of restructuring, rebranding and remarketing its tours as well as the decline in consumer confidence and the impact of a hot summer at home.
But analysts who talked then to First Choice still had forecasts of pounds 17m- 20m on their books yesterday morning.
The warning sent shock waves through the market, coupled as it was with a deeply discounted rights issue of two new shares for every five at 60p, raising pounds 44.1m net to fund three acquisitions and ensure the group could meet the operating margins needed to maintain market share in 1996-97.
The final dividend of 2.45p is maintained on new and existing shares, but the shares fell a further 18p to 70p.
Thomas Cook, which took a 21 per cent stake to help fight off a bid from Airtours in early 1993, will not take up its rights, which suggests an early parting of the ways. But it will not sell its shares in the market for at least six months.
Its entitlement has been placed in the market and the balance of the rights issue is fully underwritten.
The issue will finance the acquisition of Skibound, the leading operator in the UK schools and group skiing market, for an estimated pounds 23m in cash, of which pounds 9.2m is payable on completion, the balance in 1996.
Skibound made pounds 4m before tax on a turnover of under pounds 40m in the year to 30 April.
The acquisition will help reduce reliance on summer profits and make better use of aircraft capacity
First Choice is also buying JWT, the third largest tour operator in Ireland, for pounds 5.4m, and the balance of the Vancouver-based Fiesta West for an estimated pounds 8.7m.
But the future depends heavily on the 1996 summer season, which yet again has started well. Baron expects the market to be static but relies on industry-wide capacity cuts of 8-10 per cent to reduce discounting and restore margins.
Investment Column, page 18