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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future