Online travel raises new funds by share placing ahead of licence renewal

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The Independent Online

Online Travel Corporation, which operates a plethora of internet travel sites including deckchair.com and ThomasCook.com, unsettled the City yesterday by admitting it had been forced to turn to its shareholders to shore up its balance sheet.

It is placing 55.3 million new shares - some 45 per cent of its issued share capital - with institutional investors to raise £7.9m net of expenses.

Shares in lastminute.com and ebookers tumbled 7 per cent as investors fretted about the strength of their own balance sheets. Lastminute, which failed to impress with its maiden profit last month, is also struggling to shake off a critical report from the stockbroker Collins Stewart that claimed its shares were "ridiculously overvalued".

Mark Jones, OTC's chief executive, said the placing meant the company could secure a new ATOL (Air Travel Operators Licensing). Without fresh funds, the group would have failed the Civil Aviation Authority's net free asset test, which deems companies must have net free assets equalling at least 3 per cent of their projected turnover to be awarded an ATOL.

Mr Jones said that with net current liabilities of £2.8m, the group would have failed the CAA's test now, let alone next year when its own sales are forecast to soar sharply. "We were pre-empting the CAA because we thought our balance sheet needed strengthening. But we wouldn't have had enough free assets anyway," he said.

Shares in OTC, which came close to being taken over last year when its stock was worth 34p, rose 0.75p to 18p on confirmation that the new shares had been conditionally placed with about 15 institutional investors.

Mr Jones said: "The fundraising puts the company on a sound financial footing and will enable us to build on the sales growth we are experiencing." He said sales at the group's flagship OnlineTravel.com site had soared by 300 per cent over the past six weeks.

OTC, which has cut 50 jobs and closed three of its five offices in the past year, reported group losses of £5.9m for the year to 31 October, up from £3m the previous year.

Altium Capital, the group's broker, raised its pre-tax profit forecast for next year to £3.5m from £3.3m, adding: "The successful placing secures the medium-term financial health of the company."

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