Ailing First Choice gives profits warning bonus hopes

Francis Baron, the chief executive brought into the ailing tour operator First Choice, then called Owners Abroad, two years ago, admits he does not expect much of a bonus for the year that ends this month, after warning that profits will drop back from pounds 16m to a bare pounds 1m.

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

Start your day with The Independent, sign up for daily news emails
News
news
Arts and Entertainment
British author Helen Macdonald, pictured with Costa book of the year, 'H is for Hawk'
booksPanel hail Helen Macdonald's 'brilliantly written, muscular prose' in memoir of a grief-stricken daughter who became obsessed with training a goshawk
Sport
footballLive blog: Follow the action from the Capital One Cup semi-final
Life and Style
food + drink
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century