MyTravel ready to hit takeover trail

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The Independent Online

MyTravel, the tour operator trying to escape its turbulent past, predicted yesterday that it could return to the acquisition trail this year as it reported narrower interim losses.

The company, which has promised to return its core UK business to profit this year, revealed it would have hit its recovery goals one year early if soaring fuel and currency costs had not knocked it off course.

It admitted it had left itself wide open to the recent record oil prices and swings in the Swedish kroner and the US dollar. Coming into summer, it had hedged just 25 per cent of its fuel needs - an oversight blamed on the distraction of restoring the group's financial health.

Peter McHugh, the chief executive, said absorbing an extra £60m in fuel and currency costs this year would prevent MyTravel from hitting its 3.5 per cent operating margin target 12 months ahead of schedule.

Its shares, which have performed strongly since an £800m debt-for-equity swap secured its financial future at the end of 2004, slipped 8p to 220.5p. Despite signs that its UK business has turned the corner, the company said it still had more package holidays left to sell than at the same point last year.

It cut the number of charter holidays on offer for this summer by 1.3 per cent yet bookings are running 2.6 per cent behind last year's numbers. "We're slightly off but we're well within the range of being okay," Mr McHugh said.

Echoing its rival First Choice, MyTravel blamed the industry-wide slump on the World Cup, which has kept potential holidaymakers in the UK. Mr McHugh said the group would need to see "some recovery" after the tournament ends for it to hit its strategic goals.

The company intends to resume dividend payments in December 2007 and is cutting up to £40m from its UK cost base by selling more holidays over the internet and reducing sales and marketing costs.

The group has embarked on a strategic review that could see it target acquisitions less than two years after it dismantled much of the legacy left by the company's founder, David Crossland, with wide-ranging disposals.

Mr McHugh said he was looking at potential acquisition targets in the UK and US, adding that a deal could come within months. "We're looking at opportunities," he said. One area of interest was the growing independent travel market, he added.

He also said that MyTravel could move back into the cruise business, less than two years after selling its cruise ships. Mr McHugh, who ran the Holland America cruise line at the US travel giant Carnival, said the four ships sold had been built in the 1970s. A new business would focus on UK customers.

MyTravel's losses before tax for the six months to 30 April were £70.3m, down from £119.5m the previous year. The company attributed a fall in profits in North America, from £24.3m to £15.9m, to rising fuel costs and the effects of Hurricane Wilma, but profits in Northern Europe came in at a record £17.9m.

In the UK, MyTravel cut its losses to £108.8m from £131.5m during winter 2004. The UK sales fell to £443m from £506m a year ago, mainly because of its cuts in capacity.