The Investment Column: Airtours

The Investment Column: Airtours

IT HAS been a turbulent year for Airtours, Britain's second largest package holiday company. Plan A - its bid for rival First Choice - has been grounded by the competition bigwigs in Europe. The question is whether the company has a plausible plan B. The worry has been that with the First Choice option seemingly a non-starter, Airtours might look constrained in the highly competitive British holiday business.

Some of the gloom lifted yesterday with a solid set of full -year results. Full-year pre-tax profits before exceptionals rose 12 per cent to pounds 157m and the outlook is encouraging. UK bookings this winter are up by 5 per cent on last year; next summer's bookings are 29 per cent up. After two profits warnings from Thomson Travel, the market leader, the relief factor pushed Airtours' shares 28p higher to 357p.

The company performed well in Scandinavia, where a record amount of holidays were sold at full prices. Airtours also held its ground at home although sales of holidays around the millennium have been poor. Airtours wants to continue expanding in Germany, North America and other European countries.It has the cash resources to fund acquisitions, but recently suffered a setback with its failure to acquire Germany's Deutsche Reisebuero. Meanwhile, Airtours is responding well to the challenge of online sales through its own agency, Direct Holidays. On the downside, some of Airtours' performances overseas need improving and Scandinavian winter bookings are 10 per cent down on last year.

On full-year profit forecasts of pounds 170m, the shares trade on a forward multiple of 13. While the rating reflects the risk that rivals will flood the market with capacity, it is good value for one of the best managed businesses in the sector.