Investment: Airtours hints at buying spree

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The Independent Online
AIRTOURS, Britain's second largest tour operator, yesterday reported strong first quarter bookings and hinted at a possible pounds 300m buying spree.

Airtours raised pounds 250m via a bond issue in November before later raising an additional pounds 50m. The company said yesterday that it was likely to use the funds for acquisitions, particularly in the US and mainland Europe.

"Further consolidation is not inevitable but we believe that there is a will among the major players to continue the process," the company said, hinting that there may also be further opportunities in the UK.

The news came as Airtours reported slightly increased losses of pounds 19.4m in the traditionally loss-making first quarter. But the shares soared 27p to 441p on a current trading update which showed that UK winter bookings are 6 per cent ahead of last year, with like-for- like bookings for the summer up by a healthy 5 per cent.

Capacity has also been cut by 5 per cent as the industry gradually learns the lesson that it is more important to sell fewer holidays at full prices.

The millennium factor is also starting to kick in with winter 1999 sales 20 per cent up on last year, with higher prices too.

Margins are up in the US on lower sales as the company stripped out less profitable holidays and Scandinavia is also trading well.

The figures pleased analysts although Bruce Jones at Merrill Lynch said: "It looks good but with this sector you can never take your eye off it."

He pointed out that Thomas Cook, one of Airtours' main high street competitors, has also been trading well.

On full-year profit forecasts of pounds 163m the shares trade on a forward multiple of 17 and still languish well below their 541p, 12-month peak in May.

"This is a 15 per cent discount to the market and it really deserves a market rating," said one analyst.

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