Owners Abroad's profit warning savages the share price: Year's figures will be half the level of current market expectations, says company

OWNERS ABROAD, the package holiday operator that fought off a pounds 300m bid from its rival Airtours in March, yesterday shocked the City with a strong profits warning and the resignation of its chairman and chief executive, Howard Klein, and group managing director, Roger Allard.

The shares closed down 32.5p at 66p compared with a high during the bid of 152p.

Owners said profits in the year to the end of October would be half the level of current market expectations before bid costs of pounds 4.6m. The pre-tax profit figure is likely to be pounds 15m.

Thomas Cook, the German- controlled travel agency that paid 150p a share in a tender offer in April, taking its stake in Owners to more than 20 per cent, said it strongly supported the action proposed by the board and remained fully committed to the strategic alliance.

Owners blamed its woes on severe price pressure, changes in destination preferences and directional selling since Easter. Directional selling is the practice of package operators offering incentives to travel agents they own to sell their own holidays hardest.

The company said that due to the slow rate of economic recovery, the late booking market in May and June continued to be dominated by low- cost holidays. Owners offers a more upmarket programme. Holidaymakers tempted by the devaluation of the peseta also switched to Spanish destinations, where Owners is not strong, and away from Greece and Cyprus, where Owners is dominant.

David Crossland, chairman of Airtours, said: 'The statement by Owners Abroad does not represent conditions currently being experienced in our industry. A further 500,000 holidaymakers - a 6 per cent increase - will have bought a package holiday this year.' Airtours' bookings are at present running 23 per cent higher.

Owners yesterday announced an interim loss of pounds 38.6m, including the bid costs, against a loss in the previous first half of pounds 27.2m. The interim dividend was increased by 43 per cent to 1.4p net in line with the forecast made during the bid.

Owners insisted that the problems emerged well after the bid from Airtours failed. It said that holidays to the end of April were 54 per cent sold at brochure prices, a record in the company's history. It will now have to start cutting prices to compete. It also pointed out that all statements made in the bid defence were verified by the independent auditors, Ernst & Young.

The company is now instigating management changes. The roles of chairman and chief executive are to be split and Mr Klein will stand down as soon as an independent chairman has been appointed. Day-to-day management will devolve to a committee chaired by Errol Cossey, a director of Owners. A new group chief executive and two further non-executive directors are being sought.

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