FINANCIAL RESULTS FOR FULL YEAR 2002 AND QUARTER 4 ENDED 31 DECEMBER
- ebookers announces 55% turnover increase -
- India back office continues to reduce costs -
24 March 2003: - ebookers plc, the pan-European online travel agency (LSE: EBR,
Nasdaq: EBKR), today announces financial results for the Full Year and Quarter
4 ended 31 December 2002.
Highlights (UK GAAP)
* Annual gross sales up 52% to �273m and turnover (gross profit)(1) up 55% to
�31m
(FY2001 gross sales �180m, turnover (gross profit) �20m)
* Quarter 4 gross sales up 62% to �63.9m and turnover (gross profit ) up 63%
to �8.0m
(Q4 2001 gross sales �39.4m, turnover (gross profit) �4.9m)
* India back office helps reduce annual operating expenses despite sales
growth
(Total operating expenses FY2002 �44.6m , FY 2001 �46.6m)
* Annual loss before tax halved from �25.6m in 2001 to �12.3m in 2002.
Quarter 4 loss before tax reduced from �5.9m in 2001 to �3.3m in 2002
* Annual adjusted loss before tax(3) reduced from �19.3m in 2001 to �5.2m in
2002 in line with market expectations. Quarter 4 adjusted loss before tax
reduced from �4.1m in 2001 to �0.5m in 2002
* Positive adjusted EBITDA(2) maintained in Quarter 4 despite weak
seasonality and in line with market expectations
(Q4 2002 �0.1m , Q3 2002 �0.2m, Q4 2001 - �2.9m)
* Travelbag integration on schedule for timings and savings
Dinesh Dhamija CEO ebookers plc comments:
"The growth we have achieved this year demonstrates the strength of our
business model and the opportunity for the internet in our industry. Our Indian
back office has also shown our ability to reduce cost significantly.
We are making swift progress with the Travelbag Integration, and, there too, we
will be looking to secure internet growth and reduce costs.
Although the current economic and geopolitical environment is uncertain we will
continue to focus on growth and cost reduction, on driving internet sales
through Travelbag and Bridge the World, and are confident about our prospects
for 2003."
1. The presentation of turnover has been changed from a gross to a net basis.
See note 5.
2. Adjusted EBITDA is defined in note 7.
3. Defined as loss on ordinary activities before taxation amortisation, stock
compensation charges, national insurance on share options and exceptional
items. See note 7.
*Continued/
Chairman's statement
In 2002 we saw strong growth and reduced costs. Gross sales grew to �273m from
�180m in 2001, an increase of 52%, nearly all of which was organic (not from
acquisitions). These figures are all the more noteworthy given the continued
slowdown in much of the rest of the travel industry caused by the tragedy of 9/
11 and global economic slowdown. As well as undergoing strong growth, ebookers
has made major advances in its bid to be the lowest-cost provider in European
online travel. We believe our Business Process Outsourcing ("BPO") facility in
New Delhi, India provides us with a distinct cost advantage over our
competitors. Fourteen separate functions are carried out there by a graduate
workforce on competitive local salaries. Group-wide, adjusted operating
expenses in 2002(Defined in note 7) were equivalent to 12% of gross sales,
compared to 20% in 2001. With increased scale, our BPO facility, and new
technology, we are firmly focused on reducing our cost base relative to our
sales.
Board
It was with regret that in January 2003 we said goodbye to Sanjiv Talwar,
ebookers' second employee, and our Managing Director who has been advised to
take a break from his career for health reasons. Overall, however, the period
since our last annual results announcement has seen a major strengthening of
our management team with the appointment of seasoned industry professionals
with large company experience. Earlier in the year, Nigel Addison Smith joined
ebookers as Chief Financial Officer following periods of service at First
Choice, Air 2000 and KPMG. John Donaldson, former CEO of Thomas Cook, also
joined us as a Non-Executive Director. Following our acquisition of Travelbag,
we welcome to the Board Peter Liney as UK Managing Director and Executive
Director. Peter Liney worked for British Airways from 1988 to 1999, where he
held various senior positions including Head of Leisure Sales for the United
Kingdom and General Manager, Asia Pacific Alliances. Other senior non-board
appointments included Peter Bradshaw as UK Finance Director in February 2003
from Travelbag, Philip Dale, who joined as Chief Information Officer in April
2002, from Priceline.com, and Thomas Meyjes who joined us in November 2002 as
Regional Director from KLM. In addition, I am delighted that all of Travelbag's
senior management have joined the Group.
Outlook
We were pleased to see a return to strong trading in January after the weak
trading at the end of last year. However, as war in Iraq became more likely,
we experienced a dampening effect on our UK sales and turnover (gross profit).
We reacted to this weakening of sales by reducing our cost base and therefore
still expect to report a satisfactory first quarter. Travelbag's financials
will be consolidated from February 2003 and given the difficult trading
environment, we are satisfied with their trading performance to date.
The commencement of hostilities against Iraq on 19 March, 2003 will
inevitability have an impact on sales and profitability for the remaining days
of the first quarter. Looking forward, no one knows how long the current
political situation will remain. However, whilst having contingency plans in
place should actions in the Middle East become protracted we are focused on
taking advantage of the anticipated recovery in the market after hostilities
end. After both the first Gulf War and 9/11 our business experienced rapid
recovery as European consumers swiftly regained their confidence in booking
leisure travel. Following 9/11, our internet business showed particularly rapid
recovery and growth rates accelerated over the following quarters.
We view our prospects for 2003 and beyond with optimism. We are in an
excellent position to benefit from the continued shift of consumers onto online
sales channels. Of course, the year will not be without business challenges -
the integration of Travelbag, the growth of our capacity in Delhi and the
continued development of our website technology - but I believe that our
management and staff have the enthusiasm and capability to deal with these.
Operating review
Acquisition of Travelbag
In February 2003 we successfully completed the �55m acquisition of Travelbag in
furtherance of the acquisition strategy we announced in the first half of 2002.
At that time, we announced our intention to make large-scale acquisitions of
mainly offline travel companies in order to meet our target of �1bn of
annualised gross sales within 2004 through both acquisitive and organic growth
(i.e. during a quarter in 2004 we aim to achieve gross sales in excess of �
250m). Also, to secure the following benefits:
* increased scale, leading to higher margins through better buying and
negotiating power with suppliers;
* cost synergies through the use of ebookers' Indian BPO facility, which
reduces processing and administrative costs of an acquired entity;
* increasing the growth rate of the acquired businesses by taking them online
using ebookers' technology and expertise; and
* improved range and depth of supplier product relationships.
Travelbag is a profitable travel agency and in the top three of the United
Kingdom non-package, non-business sector. In its current financial year, ending
March 2003, we estimate that it will have approximately �200m of annual gross
sales compared to �273m for ebookers in 2002. It has a greater long-haul focus
than ebookers. Approximately 98% of its sales are long and mid-haul,
particularly to the high-value Australia and New Zealand markets. Its gross
margin during the financial year ending March 2003 is estimated to be
approximately 14% with an average transaction value of �1,450, compared to
11.5% and �582 for ebookers in the United Kingdom for 2002. Travelbag sells
over the telephone, through a network of 12 shops, and through its websites:
www.travelbag.co.uk, www.bridgetheworld.com and www.travelbag-adventures.com.
An Integration Committee was formed in February 2003 and has already made
significant progress in planning major cost and revenue synergies from the
integration of Travelbag into the Group. The aims of the Committee are to:
* translate increased scale into increased buying power by leveraging
combined gross sales of nearly �500m;
* maximise group-wide product synergies. ebookers is strong on travel to the
United States. Travelbag is strong on Australia/New Zealand and adventure
travel;
* achieve internet growth with the Travelbag brands. Travelbag's traditional
focus has been on offline sales channels such as the telephone. ebookers
aims to use its technology to transform the customer and transactional
experience of Travelbag's websites and assist it to achieve higher growth
rates than achieved historically. ebookers has considerable experience of
growing the internet sales of offline travel businesses and "online booking
incentives" to encourage traditionally offline customers to transfer to the
internet; and
* realise significant operating synergies through the merger of the head
offices of Travelbag and ebookers in the United Kingdom, and the transfer
of certain Travelbag processes to ebookers' Indian BPO facility, as was
done in 2002 following the integration of Flightbookers.
Indian BPO(Back Office) Facility
ebookers' 22,000-square-feet Indian BPO facility is a competitive advantage and
underlines our commitment to becoming the lowest-cost provider in the European
online travel industry. It gives us the capacity to take on increases in
internet and telephone sales at lower cost. With a highly-qualified graduate
workforce, undergoing structured programmes of training, in some areas such as
call centre conversion, Indian staff are already achieving standards on a par
with their European colleagues. During the second half of 2002, the Indian BPO
facility became fully operational with staff numbering 400 by the end of
December. Staff carry out various processes including email sales, customer
service, competitor pricing analysis, accounting and IT development. The Indian
BPO facility provides multiple data and power backup to ensure activities are
continued uninterrupted on a 24/7 basis. No import or excise duty is charged on
capital goods and our subsidiary is exempt from corporate income tax until
2010.
In its establishment phase, the majority of processes carried out in the Indian
BPO facility have been for ebookers' UK operations. However, other operating
countries are now starting to transfer functions where appropriate. For
example, France outsourced email and back office functions to India in 2002 as
well as transferring some call centre functions to ebookers' multilingual hub
in Dublin. Finland, too, is making significant use of the Indian BPO facility
and initial migration of call centre functions to India started in August 2002.
A second call centre team started in January 2003 with many back office
functions expected to be transferred in the first half of 2003. In future,
ebookers anticipates that incremental cost savings from India will become far
more significant as scale increases. The Indian BPO facility is already gearing
up to take on additional workload following the acquisition of Travelbag.
Product development
As a result of our 20-year heritage and the relationships we have established
during that time, we believe that we have one of the widest travel product
ranges on the web in Europe. By negotiating directly with travel suppliers we
help airlines, hotels, cruise and car hire companies sell their capacity while
offering our customers savings of up to 75% on standard prices. The benefit for
ebookers is that these "merchant fares" are attractive to customers, yet have
high margins and carry no inventory risk.
In 2002, our product teams throughout Europe focused on increasing the size and
attractiveness of our product range while supporting Group profitability
targets. A major focus has been to improve margins and customer spend by
selling more high-value directly negotiated non-air products on websites and
through our call centres, and in particular by "cross selling" these products
with flights. Our merchant hotel and car hire products offer excellent value to
the customer, yet can give us margins up to three times higher than an airfare.
To support this objective, in 2002, we launched specialist sections on our
websites including Luxurybookers, Hotelbookers and ebookers Sports in the
United Kingdom. Product presentation was also improved through the launch of
destination and themed microsites for example, a new Australasia section, and
areas for ski, snowboarding and golf holidays.
Sales and marketing
ebookers continues to implement a sales and marketing strategy based on
cost-effective execution while maintaining high growth. In 2002, sales and
marketing spend was equivalent to 5.7% of gross sales as compared to 10.6% in
2001.
We utilised both online and offline marketing tools in 2002 to encourage
consumers to book via the internet. ebookers' main approach in 2002 was to use
targeted niche marketing rather than mass media such as television. Online,
ebookers continues to develop partnerships and affiliations with major portals
and search engines including Yahoo, Lycos, Google, Overture, espotting, BT
Looksmart and Tiscali, Wanadoo.nl in the Netherlands, Bluewin in Switzerland
and startsriden.no in Norway.
A marketing aim of 2002 was to develop the sale of high-value high-margin
specialist products, therefore we have launched dedicated email newsletters to
support the new specialist sections on the ebookers website including sports
and luxury mailings.
Offline we employed a diverse and innovative marketing mix ranging from public
relations to print newspapers to the radio. For example, in 2002 we carried out
a London Underground and poster advertising campaign in the United Kingdom,
advertised on trains to Oslo airport and launched a "new look" poster campaign
in Ireland. We also took part in numerous promotions. For example, in the
Netherlands we had promotions with well-known fast food, music retail and soft
drinks brands, and advertised on one of the country's biggest radio stations.
ebookers' call centre strategy is also supporting cost and profitability
targets. In 2002 in the United Kingdom and Ireland, ebookers implemented a new
call routing strategy. Higher-margin and high-value complex enquiries are
routed to more experienced European sales staff, while lower margin point to
point or short haul enquiries are routed to our Indian BPO facility.
Technology
In 2002, we continued to invest in implementing group-wide IT systems, giving
us the ability to process large volumes of multi-product automated web-based
sales, combined with efficient information, financial and reporting systems. A
new web-based middle office system is being implemented in the United Kingdom
and Ireland and is currently expected to be extended across further ebookers'
operations. We also invested in a new back office accounting system which has
already gone live in the UK and India. In India we have the added advantage of
much lower software licensing costs on our accounting packages.
During 2002 customer-facing technology development supported margin improvement
and sales growth objectives. We launched an improved hotel booking engine and
the first stage of a dynamic packaging system enabling customers to save money
by buying flight and hotel modules together as a package.
Strategy for 2003
Our strategy for 2003 aims for high growth, while maintaining our commitment to
be one of the lowest-cost providers in the European online travel industry.
During 2003 we aim to:
* fully integrate Travelbag and maximise revenue and cost synergies;
* increase our revenues by selling more high-margin non-air products such as
cars and hotels through new technology and improved negotiation with
product suppliers;
* encourage more bookings on our websites by continually improving usability
and functionality and to improve the website technology of the brands we
have acquired;
* continually improve our product range and differentiate our brands from the
competition by offering the widest range of products at the best prices;
* keep costs low by increasing our use of automation technology;
* maximise the use of our low-cost Indian BPO facility by transferring all
functions for which it is profitable and practicable to do so; and
* consider further acquisitions, particularly in continental Europe, provided
that these acquisitions are in line with ebookers' stated acquisition
strategy and benefit its shareholders.
We look forward to implementing the above strategy and delivering another year
of significant operational progress.
Financial Review
2002 was a successful year and we made strong progress towards achieving
profitability. We met two key financial targets, generating cash for the first
time in Quarter 1 and reaching positive adjusted EBITDA (see note 7) in Quarter
3.
Summary
ebookers delivered strong growth in turnover (gross profit) (see note 5) in
2002 while maintaining margins. Total operating expenses decreased from �46.6m
in 2001 to �44.6m in 2002. Adjusted operating expenses (see note 7) decreased
as a percentage of gross sales from 20% in 2001 to 12% in 2002. During the
second half of the year our investment in our Indian BPO facility made a
significant contribution to this falling cost base, underlining ebookers'
commitment to being the lowest-cost provider in the European online travel
industry.
In Quarter 4, turnover (gross profit) increased to �8.0m, up 63% on Quarter 4
2001. At the same time Quarter 4 costs reduced significantly against the
preceding quarter, again indicative of the effect of our Indian BPO. Adjusted
operating expenses for Quarter 4 decreased from �9.1m in Q3 2002 to �8.0m in Q4
2002.
Gross sales
Gross sales increased from �179.8m in 2001 to �273.5m in 2002, an increase of
52%. This was nearly all organic (non-acquisition) growth, driven primarily by
continued consumer internet take-up, better call centre conversion rates, as
well as an increase in average spend supported by our marketing strategy that
aims to push customers towards higher value products.
Turnover (gross profit)
Turnover (gross profit) also reached a record level of �31.4m, up 55% on last
year's restated figure of �20.3m. The gross profit margin on gross sales
remained strong at 11.5% in 2002 compared to 11.3% in 2001.
Due to our increasing size and reach, ebookers is becoming increasingly
important as a distribution platform and has negotiated incentives with many
key suppliers. The overall effect of these incentives is to help compensate for
the erosion in basic margin (commission) on published fares. In addition, the
majority of ebookers' sales are negotiated merchant fares for which ebookers
marks up its own margins and are therefore not subject to commission cutting.
In 2002 approximately 71% of ebookers' gross sales were due to merchant fares
(2001: 72%).
In Quarter 4, turnover (gross profit) increased from �4.9m in Q4 2001 to �8.0m
in Q4 2002. The gross profit margin on gross sales was 12.6% in Q4 2002
compared to 12.5% in Q4 2001. Quarter 4 2001 had particularly high margins due
to increased distressed inventory after the 9/11 terrorist attacks, therefore
the margin increase achieved in Q4 2002 is particularly encouraging.
Operating expenses
2002 has been a successful year for cost reduction in both absolute and
relative terms. Adjusted operating expenses (see note 7) were �33.5m in 2002
compared to �36.3m in 2001. As a percentage of gross sales, this represents an
improvement from 20% in 2001 to 12% in 2002. This improvement was achieved
despite dual costs incurred over the year during the establishment phase of our
Indian BPO facility. In 2003 ebookers will continue to implement its strategy
of moving functions to India whenever possible. Total operating expenses
decreased from �46.6m in 2001 to �44.6m in 2002.
Quarter 4 costs decreased significantly against the preceding quarter,
indicative of the effect of our Indian BPO. Adjusted operating expenses for
Quarter 4 decreased from �9.1m in Q3 2002 to �8.0 m in Q4 2002 (Q4 2001 �7.9m).
Total operating expenses in Q4 2002 was �11.6m compared with �10.8m in Q4 2001.
The increase was due mainly to increased stock compensation expenses and
national insurance charges on stock options in Q4 2002.
Sales and marketing costs
Sales and marketing costs were �15.7m in 2002 compared to �19.0m in 2001, a
decrease of 17%, despite strong gross sales growth of 52%. This resulted from
the impact of ebookers' Indian BPO facility and also a more cost-effective
marketing strategy. In Q4 2002 sales and marketing costs were �3.3m compared
with �3.8m in Q4 2001, a decrease of 12%.
Administrative expenses
Technology costs in 2002 were �3.1m compared with �2.6m in 2001. As a
percentage of gross sales this represents an improvement from 1.4% in 2001 to
1.1% in 2002. The absolute increase reflects greater focus on developing
automation and website technology, such as improvements to booking engine
software. The main element of technology costs is staff and consultancy costs,
along with ongoing costs associated with technology running and maintenance
including communication and hosting expenses. In Q4 2002 technology costs were
�0.9m compared with �0.5m in Q4 2001.
General administrative expenses decreased to �14.6m in 2002 compared to �14.7m
in 2001 despite the growth in the business. General administrative expenses as
a percentage of gross sales were reduced from 8.2% in 2001 to 5.4% in 2002.
This results from the business' ongoing focus on cost control and the impact of
ebookers' low-cost Indian BPO facility. Key items of general administrative
expenses include salary costs for non-sales and marketing and technology staff,
building costs, telecommunication costs, and professional fees. In Q4 2002
general administrative expenses were �3.7m compared to �3.5m in Q4 2001, a
decrease as a percentage of gross sales from 9.0% in 2001 to 5.8% in 2002.
Administrative expenses in Q4 2002 also included �0.5m resulting from the
amortisation of profit on a sale and leaseback transaction of IT equipment.
Depreciation increased by 12.9% to �4.5m in 2002, compared to �4.0m in 2001,
partly as a result of the sale and leaseback transaction described above, which
while generating profits of �0.5 million reported above, also gave rise to a �
0.3m higher depreciation charge. As a percentage of gross sales, depreciation
decreased from 2.2% in 2001 to 1.7% in 2002.
Administrative expenses in Q4 2002 also included �1.1m relating to National
Insurance liability for the potential exercise of stock options. This resulted
from the increase in share price during the period.
Stock compensation cost increased from �0.8m in 2001 to �1.2m in 2002. This
increased stock compensation cost results from an increase in the charge for
variable scheme options (within which the number of options changes as the
issued share capital changes). Stock compensation cost was �0.5m for Q4 2002
compared to a credit of �0.2m for Q4 2001.
Amortisation cost remained at same levels as last year with only a 1.3%
increase from �4.7m in 2001 to �4.8m in 2002.
Adjusted EBITDA
Adjusted EBITDA (see note 7) improved from negative �16.0m in 2001 to negative
�2.0m in 2002. We achieved our first quarterly positive adjusted EBITDA
milestone in the Quarter 3. In Q4 2002 Adjusted EBITDA was a profit of �0.1m
compared to a loss of �2.9m in Q4 2001.
Operating loss and loss on ordinary activities before taxation
As a result of the above, operating loss reduced from �26.3m in 2001 to �13.2m
in 2002. Our loss on ordinary activities before taxation improved from �25.6m
in 2001 to �12.3m in 2002. In Q4 2002 operating loss was �3.6m compared with �
5.9m in Q4 2001. Loss on ordinary activities before taxation was �3.3m in Q4
2002 compared with �5.9m in Q4 2001.
Treasury
As at 31 December 2002, ebookers had net cash of �21.3m compared with �20.1m at
31 December 2001. The above results led to a cash inflow for 2002 of �1.0m
compared to a cash outflow of �13.1m in 2001.
Loss per share
Basic and diluted loss per share decreased from 55.49p in 2001 to 25.62p in
2002. In Q4 2002 basic and diluted loss per share was 7p compared to 13p in Q4
2001.
1. The presentation of turnover has been changed from a gross to a net basis,
see note 5.
--ends--
For further information:
ebookers plc
Oliver Strong +44 (0) 20 7489 2239
oliver.strong@ebookers.com +44 (0) 7771 934 153
Cubitt Consulting (UK)
Peter Ogden +44 (0) 20 7367 5100
peter.ogden@cubitt.com
Webcast and conference call
When: Monday 24 March 2003 at 15:00 GMT 17:00 CEST & 11:00 ET.
Where: For registration of the live event please click on the link below:
http://meta.unit.net/ebookers/20030324/index.html
Should you wish to take part in the Conference Call, please dial one of the
following numbers:
UK dial in 0845 245 3471
International dial in +44 (0) 1452 542 300
A replay of the conference will be available for 7 days on the following
numbers:
UK 0845 245 5205
International +44 (0) 1452 55 00 00
Replay Access Number: 960507#
If you are unable to participate during the live audio webcast, the event will
be archived on the same URL as listed above for 90 days from the date of the
event.
About ebookers plc
ebookers is a leading pan-European online travel agency with websites in 11
European countries - UK, France, Ireland, Germany, Spain, Holland, Switzerland,
Sweden, Denmark, Norway, and Finland. It specialises in the mid- and long-haul
modular leisure segments of the European travel industry. It also specialises
in selling discount merchant fares, which are negotiated directly with leading
travel suppliers in order to help them sell their excess capacity without
damaging their pricing structure and brands. ebookers has a low-cost BPO
facility in New Delhi, India with a staff of over 400, which carries out 14
separate functions from email sales to software development. The Company has a
multi brand marketing strategy. Its brands include ebookers.com, Flightbookers,
Travelbag, Travelbag Adventures Bridge the World, and MrJet. ebookers plc is
listed on the London Stock Exchange and quoted on Nasdaq in the United States
of America.
Forward Looking Statements
Except for the historical information contained herein, the matters discussed
in this news release are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
in such forward looking statements. Potential risks and uncertainties include,
without limitation, the company's ability to identify, acquire and integrated
companies across Europe including Travelbag Holdings, its ability to
significantly increase its online revenues and sales volumes, to maintain and
develop relationships with travel suppliers and strategic partners and to
attract and retain customers, potential adverse changes in its gross mark up or
in commission rates, reduce its operating costs through outsourcing certain
functions to India, unforeseen events affecting the travel industry, and the
company's dependence on its ability to establish its brand. The foregoing list
of important factors is not exhaustive. When relying on forward-looking
statements, readers should carefully consider the foregoing factors and other
uncertainties and events, as well as factors described in documents ebookers
plc files from time to time with regulatory authorities in the United Kingdom
and the United States, including annual reports on Form 20-F filed with the US
Securities and Exchange Commission. Any forward-looking statements speak only
as of the date on which they are made and except as required by the rules of
the UK Listing Authority, the London Stock Exchange and applicable law,
ebookers plc undertakes no obligation to update publicly or revise any
forward-looking statements.
CONSOLIDATED PROFIT AND LOSS ACCOUNT Year Year
ended ended
31-Dec-02 31-Dec-01
[Prepared in accordance with UK �'000 �'000
GAAP]
(audited) (audited)
GROSS SALES 273,491 179,753
Turnover (gross profit) 31,430 20,303*
Distribution costs:
Sales and marketing (15,705) (18,965)
Administrative expenses:
Technology costs (3,117) (2,589)
General administrative expenses (14,645) (14,716)
Depreciation (4,546) (4,025)
Amortisation of profit on sale and leaseback 479 -
transaction
National Insurance on stock options (1,135) -
Stock compensation cost (1,194) (831)
Amortisation (4,761) (4,696)
Exceptional item - provision for impairment - (784)
of goodwill
Total administrative expenses (28,919) (27,641)
Total operating expenses (44,624) (46,606)
Operating loss (13,194) (26,303)
Interest receivable and similar 1,002 1,128
income
Interest payable and similar (140) (466)
charges
Loss on ordinary activities before taxation (12,332) (25,641)
Tax charge on loss on ordinary (155) (75)
activities
Loss on ordinary activities after (12,487) (25,716)
taxation for the financial year
Weighted average number of shares (in 48,741 46,336
thousands)
Basic and diluted loss per share (25.62)p (55.49)p
* The presentation of turnover has changed during this year; see note 5 for
details.
All activities are derived from continuing operations
CONSOLIDATED BALANCE SHEET
As As restated
restated* *
31-Dec-02 31-Dec-01 30-Sep-02
[Prepared in accordance with UK �'000 �'000 �'000
GAAP]
(audited) (audited) (unaudited)
Fixed Assets
Intangible assets 10,279 15,040 12,044
Tangible assets 3,816 6,180 4,178
14,095 21,220 16,222
Current Assets
Debtors 6,107 5,707 9,155
Cash at bank and in hand 21,729 20,098 26,193
27,836 25,805 35,348
Creditors: amounts falling due within one (26,307) (21,411) (33,999)
year
Net Current Assets 1,529 4,394 1,349
Total assets less current 15,624 25,614 17,571
liabilities
Creditors: amounts falling due after more - (200) -
than one year
Provisions for liabilities and (1,770) (635) (635)
charges
Net assets 13,854 24,779 16,936
Capital and reserves
Called up share capital 7,009 6,557 6,982
Share premium account 73,778 68,525 73,402
Merger reserve 2,194 2,194 2,194
Shares to be issued 19,080 23,139 18,587
Profit and loss account (88,207) (75,636) (84,229)
Equity shareholders' funds 13,854 24,779 16,936
* Provisions for liabilities and charges have been reclassified from within
creditors due within one year.
CONSOLIDATED CASH FLOW STATEMENT Year Year
ended ended
31-Dec-02 31-Dec-01
[Prepared in accordance with UK �'000 �'000
GAAP]
(audited) (audited)
Net cash inflow/(outflow) from 3,828 (12,306)
operating activities
Returns on investment and servicing of
finance
Interest received 872 1,128
Interest element of finance (27) (71)
lease rental payments
Interest paid (113) (122)
Net cash flow from returns on
investment and
servicing of finance 732 935
Overseas tax (paid)/received (213) 47
Capital expenditure and financial
investment
Payments to acquire tangible fixed (2,781) (2,911)
assets
Receipts from sale of tangible - 329
fixed assets
Net cash flow from capital
expenditure and
financial investment (2,781) (2,582)
Acquisitions
Payments to acquire subsidiary - (59)
undertakings
Cash acquired with subsidiaries - 419
Net cash flow from acquisitions - 360
Net cash inflow/(outflow) before 1,566 (13,546)
financing
Financing
Issue of ordinary shares 454 -
Sale and leaseback - 1,200
Capital element of finance lease (1,034) (746)
payments
Net cash flow from financing (580) 454
Increase/(decrease) in cash in 986 (13,092)
the year
CONSOLIDATED QUARTERLY PROFIT AND LOSS Quarter Quarter Quarter
ACCOUNT
ended ended ended
31-Dec-02 31-Dec-01 30-Sep-02
[Prepared in accordance with UK �'000 �'000 �'000
GAAP]
(unaudited) (unaudited) (unaudited)
GROSS SALES 63,918 39,400 77,949
Turnover (gross profit) 8,023 4,923* 9,216*
Distribution
costs:
Sales and (3,333) (3,782) (4,629)
marketing
Administrative expenses:
Technology costs (933) (547) (716)
General administrative (3,695) (3,531) (3,717)
expenses
Depreciation (1,330) (1,220) (1,100)
Amortisation of profit on sale and 479 - -
leaseback transaction
National Insurance on (1,135) - -
stock options
Stock compensation (cost)/ (493) 167 -
credit
Amortisation (1,185) (1,122) (1,192)
Exceptional item - provision for - (784) -
impairment of goodwill
Total administrative (8,292) (7,037) (6,725)
expenses
Total operating expenses (11,625) (10,819) (11,354)
Operating loss (3,602) (5,896) (2,138)
Interest receivable and similar 312 144 261
income
Interest payable and (30) (112) (84)
similar charges
Loss on ordinary activities before (3,320) (5,864) (1,961)
taxation
Tax charge on loss on ordinary (226) (14) (8)
activities
Loss on ordinary activities after (3,546) (5,878) (1,969)
taxation retained for the
financial quarter
Weighted average number of shares (in 49,969 46,833 49,874
thousands)
Basic and diluted loss per (7.10)p (12.55)p (3.95)p
share
* The presentation of turnover has changed during this year; see note 5 for
details.
CONSOLIDATED CASHFLOW STATEMENT Quarter Quarter Quarter
ended ended ended
31-Dec-02 31-Dec-01 30-Sep-02
[Prepared in accordance with UK �'000 �'000 �'000
GAAP]
(unaudited) (unaudited) (unaudited)
Net cash (outflow)/inflow from (3,126) (1,863) 1,959
operating activities
Returns on investment and servicing of
finance
Interest received 182 144 261
Interest paid (11) (112) (84)
Net cash flow from returns on
investment and
servicing of finance 171 32 177
Overseas tax paid (205) (26) (8)
Capital expenditure and financial
investment
Payments to acquire tangible fixed (1,567) (889) (79)
assets
Net cash flow from capital
expenditure and
financial investment (1,567) (889) (79)
Net cash (outflow )/inflow before (4,727) (2,746) 2,049
financing
Financing
Issue of ordinary shares 404 200 -
Capital element of finance lease (167) (256) (417)
repayments
Net cash flow from financing 237 (56) (417)
(Decrease)/increase in cash in (4,490) (2,802) 1,632
the quarter
NOTES TO THE ACCOUNTS
1. Segmental analysis and trading information
Gross sales(1) Turnover (gross profit)
(2)
Year Year Year Year
ended ended ended ended
31-Dec-2002 31-Dec-2001 31-Dec-2002 31-Dec-2001
�'000 �'000 �'000 �'000
(audited) (audited) (audited) (audited)
UK 181,606 110,696 21,315 12,764
non-UK 91,885 69,057 10,115 7,539
273,491 179,753 31,430 20,303
(Loss)/profit before tax Net assets/(liabilities)
Year Year
ended ended As at As at
31-Dec-2002 31-Dec-2001 31-Dec-2002 31-Dec-2001
�'000 �'000 �'000 �'000
(audited) (audited) (audited) (audited)
UK (13,546) (25,279) 11,908 25,473
non-UK 1,214 (362) 1,946 (694)
(12,332) (25,641) 13,854 24,779
Gross sales(1) Turnover (gross profit)
(2)
Quarter Quarter Quarter Quarter
ended ended ended ended
31-Dec-2002 30-Sep-2002 31-Dec-2002 30-Sep-2002
�'000 �'000 �'000 �'000
(unaudited) (unaudited) (unaudited) (unaudited)
UK 41,436 50,599 5,664 5,698
non-UK 22,482 27,350 2,359 3,518
63,918 77,949 8,023 9,216
(Loss)/profit before tax Net assets/(liabilities)
Quarter Quarter
ended ended As at As at
31-Dec-2002 30-Sep-2002 31-Dec-2002 30-Sep-2002
�'000 �'000 �'000 �'000
(unaudited) (unaudited) (audited) (unaudited)
UK (3,348) 855 11,908 1,738
non-UK 28 (2,993) 1,946 2,671
(3,320) (2,138) 13,854 4,409
(1) Gross sales is a memorandum disclosure and represents the total transaction
value of all our services and hence includes the total amount paid by customers
for the services provided by the Group, as opposed to the margin earned per the
Group's turnover definition. The Group reports total transaction value since
the Directors believe that it reflects more accurately the cash flows within
the Group. It is also a widely used measure of company size within the travel
sector.
(2) Turnover (gross profit) in the Group consists largely of the margins on
sales of discounted airfares on scheduled flights as well as other travel
products and services. The Group recognises revenue at the time the reservation
is ticketed as the customer generally does not have the ability to cancel
tickets or obtain refunds after ticketing, and all amounts payable have been
received. In cases where customers have the ability to cancel and obtain
refunds after ticketing, the Group is able to estimate its refund obligations
and such obligations are accounted for.
Turnover (gross profit) includes other travel product margins from hotel
reservations, car rental and travel insurance. Incentive income is also
received from the Group's service provider business partners and is recognised
as turnover (gross profit) on receipt, unless dependent upon monthly or
quarterly targets being achieved, in which case it is recognised as the targets
are achieved. In addition, turnover (gross profit) also includes advertising
revenue earned during the period. The presentation of turnover has changed in
the year see note 5 for details.
2. Reconciliation of operating loss to net cash inflow/(outflow) from operating
activities
Year ended Year ended
31-Dec-02 31-Dec-01
�'000 �'000
(audited) (audited)
Operating (13,194) (26,303)
loss
Amortisation of 4,761 4,696
goodwill
Depreciation 4,546 4,025
Stock compensation 1,194 831
charge
National insurance relating to 1,135 -
share options
Profit on sale of - (412)
fixed assets
Amortisation of profit on sale and leaseback (479) -
transaction
Goodwill writeoff on disposal of - 458
subsidiary
Provision for impairment of - 784
goodwill
Issue of shares for non-cash - 359
consideration
(Increase)/decrease in (400) 2,670
debtors
Increase in creditors 5,831 723
Exchange gains/ 434 (137)
(losses)
Net cash inflow/(outflow) from operating 3,828 (12,306)
activities
Quarter Quarter Quarter
ended ended ended
31-Dec-02 31-Dec-01 30-Sep-02
�'000 �'000 �'000
(unaudited) (unaudited) (unaudited)
Operating (3,602) (5,896) (2,138)
loss
Amortisation of 1,185 1,122 1,192
goodwill
Depreciation 1,330 1,220 1,100
Stock compensation charge/ 493 (167) -
(credit)
National insurance relating to 1,135 - -
share options
Amortisation of profit on sale and leaseback (479) - -
transaction
Provision for impairment of - 784 -
goodwill
Decrease/(increase) in 3,048 1,938 (347)
debtors
(Increase)/decrease in (6,065) (584) 1,837
creditors
Exchange (losses)/ (171) (280) 315
gains
Net cash (outflow)/inflow from operating (3,126) (1,863) 1,959
activities
3. Reconciliation of net cash flow to movement in net funds
Year ended Year ended
31-Dec-02 31-Dec-01
�'000 �'000
(audited) (audited)
Increase/(decrease) in cash in 1,420 (13,168)
the year
(Increase)/decrease in overdraft (434) 76
in the year
986 (13,092)
Cash outflow from decrease in 1,034 746
lease financing
Change in net funds resulting from cash 2,020 (12,346)
flows
New finance leases - (1,200)
Translation 211 (273)
differences
Movement in net funds for the 2,231 (13,819)
year
Net funds at 1 18,864 32,683
January
Net funds at 31 21,095 18,864
December
Quarter Quarter Quarter
ended ended ended
31-Dec-02 31-Dec-01 30-Sep-02
�'000 �'000 �'000
(unaudited) (unaudited) (unaudited)
(Decrease)/increase in cash in (4,464) (2,802) 1,470
the quarter
Decrease in overdraft in the 185 - 162
quarter
(4,279) (2,802) 1,632
Cash outflow from decrease in 167 200 417
lease financing
Change in net funds resulting from cash (4,112) (2,602) 2,049
flows
Movement in net funds for the (4,112) (2,602) 2,049
quarter
Net funds at 1 October / 1 25,207 21,466 23,158
July
Net funds at 31 December / 30 21,095 18,864 25,207
September
4. Accounting policies
With the exception of the change in policy regarding revenue presentation (see
note 5), this preliminary statement has been prepared on the basis of
accounting policies as set out in the annual financial statements at 31
December 2001.
The Group has adopted FRS 19. Tax losses have been incurred by the Group, which
are available for offset against future taxable profits. A deferred tax asset
has not been recognised in respect of these losses as in the opinion of the
Directors, the timing and realisation of suitable taxable profits is uncertain.
5. Change in turnover disclosure
From the Quarter 3 2002 onwards, the presentation of negotiated fare turnover
has been changed from a gross to a net basis. Negotiated tickets are tickets
that are bought by the Group or other independent third parties to fulfil
existing commitments to the Group's customers. The Group sells these tickets to
customers at fares determined by the Group, which are generally at a
significant discount to published fares, that is, the fare at which the
supplier offers the ticket to the public. Accordingly, all turnover is now
recorded at the margin earned rather than the amount invoiced to customers. The
Directors believe that this change in presentation more accurately reflects the
substance of the underlying transactions. All prior year information has been
restated to reflect this method of presentation.
6. Statutory information
The financial information set out above does not constitute the Company or
Group's statutory accounts within the meaning of section 240 of the Companies
Act 1985 for the years ended 31 December 2002 or 2001, but is derived from
those accounts. Statutory accounts for 2001 have been delivered to the
Registrar of Companies and those for 2002 will be delivered following the
Company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under S237(2) or
(3) Companies Act 1985. The financial information for the three month periods
ended 30 September 2002, 31 December 2002 and 31 December 2001 have neither
been audited nor reviewed by the Group's auditors.
7. Reconciliation of pro forma financial measures
Year ended Year ended
31-Dec-02 31-Dec-01
�'000 �'000
(audited) (audited)
Operating loss for the Group (13,194) (26,303)
Add back:
Depreciation and 9,307 8,721
amortisation
EBITDA (3,887) (17,582)
Add back:
Stock compensation charge 1,194 831
National Insurance on share 1,135 -
options
Exceptional item - impairment of - 784
goodwill
Amortisation of profit on sale and leaseback (479) -
transaction
Adjusted EBITDA (2,037) (15,967)
Operating expenses (44,624) (46,606)
Add back:
Depreciation and 9,307 8,721
amortisation
Stock compensation 1,194 831
charge
National Insurance on share 1,135 -
options
Exceptional item - impairment of - 784
goodwill
Amortisation of profit on sale and leaseback (479) -
transaction
Adjusted operating expenses (33,467) (36,270)
Loss on ordinary activities (12,332) (25,641)
before taxation
Add back:
Amortisation 4,761 4,696
Stock compensation 1,194 831
charge
National Insurance on share 1,135 -
options
Exceptional item - impairment of - 784
goodwill
Adjusted loss before (5,242) (19,330)
tax
7. Reconciliation of pro forma financial measures (continued)
Quarter Quarter Quarter
ended ended ended
31-Dec-02 31-Dec-01 30-Sep-02
�'000 �'000 �'000
(unaudited) (unaudited) (unaudited)
Operating loss for the Group (3,602) (5,896) (2,138)
Add back:
Depreciation and 2,515 2,342 2,292
amortisation
EBITDA (1,087) (3,554) 154
Add back:
Stock compensation charge/ 493 (167) -
(credit)
National Insurance on share 1,135 - -
options
Exceptional item - impairment of - 784 -
goodwill
Amortisation of profit on sale and leaseback (479) - -
transaction
Adjusted EBITDA 62 (2,937) 154
Operating expenses (11,625) (10,819) (11,354)
Add back:
Depreciation and 2,515 2,342 2,292
amortisation
Stock compensation charge/ 493 (167) -
(credit)
National Insurance on share 1,135 - -
options
Exceptional item - impairment of - 784 -
goodwill
Amortisation of profit on sale and leaseback (479) - -
transaction
Adjusted operating expenses (7,961) (7,860) (9,062)
Loss on ordinary activities (3,320) (5,864) (1,961)
before taxation
Add back:
Amortisation 1,185 1,122 1,192
Stock compensation charge/ 493 (167) -
(credit)
National Insurance on share 1,135 - -
options
Exceptional item - impairment of - 784 -
goodwill
Adjusted loss before (507) (4,125) (769)
tax
We use EBITDA as a measure since we believe it is useful for the investors
wishing to compare the Group with other companies that use EBITDA as a way of
reporting profit excluding the impact of non-cash items. Adjusted EBITDA
excludes non-cash and exceptional operating items and therefore we believe that
it is a useful way for investors to compare the Group's underlying EBITDA
trend, both with other companies and also with the Group's previous financial
results. We also use adjusted operating expenses and adjusted loss before tax
in order to facilitate comparisons and trends.
SUPPLEMENTARY INFORMATION, PREPARED IN ACCORDANCE WITH US GAAP
These financial statements set out below are presented in US dollar amounts,
solely for the convenience of the reader at the rates as set out below. No
representation is made that the amounts shown could have been, or could be
converted into US dollars at that, or any other rate.
CONSOLIDATED STATEMENT OF Year Year Quarter Quarter Quarter
OPERATIONS
ended ended ended ended ended
$'000 $'000 $'000 $'000 $'000
[Prepared in accordance 31-Dec-02 31-Dec-01 31-Dec-02 31-Dec-01 30-Sep-02
with US GAAP]
(audited) (audited) (unaudited) (unaudited) (unaudited)
Revenue 51,110 28,218 12,747 7,109 14,401
Operating expenses:
Marketing and sales 25,277 27,581 5,246 5,461 7,175
General and administrative 23,058 21,400 5,313 5,099 5,762
Stock compensation 22,091 55 16,513 313 (3,539)
Depreciation and 7,317 11,424 2,093 3,067 1,705
amortisation
Impairment of goodwill - 1,141 - 1,132 -
Product technology and 5,017 3,765 1,469 790 1,110
development
Total operating expenses 82,760 65,366 30,634 15,862 12,213
Operating (loss)/profit (31,650) (37,148) (17,887) (8,753) 2,188
Other income
Interest income 1,404 1,640 320 208 405
Other 209 - 116 - -
1,613 1,640 436 208 405
Other expense
Interest expense (225) (281) 8 (162) (130)
Other - (397) - - -
(225) (678) 8 (162) (130)
(Loss)/profit from (30,262) (36,186) (17,443) (8,707) 2,463
continuing operations
before income taxes
Income tax provision (249) (109) (357) (20) (12)
Net (loss)/profit (30,511) (36,295) (17,800) (8,727) 2,451
Basic weighted average 48,741 46,336 49,969 46,833 49,874
number of shares '000
Diluted weighted average 48,741 46,336 49,969 46,833 53,252
number of shares '000
Net (loss)/profit per $(0.63) $(0.78) $(0.36) $(0.19) $0.05
share - basic and diluted
Exchange rate for the 1.6095 1.4543 1.5740 1.4440 1.5500
period ($ per �)
The exchange rates used to convert the accounts maintained in GBP are the year
end rate for the full year
results and quarterly average rates for the quarterly results.
CONSOLIDATED BALANCE SHEETS As at As at As at
31-Dec-02 31-Dec-01 30-Sep-02
[Prepared in accordance with US GAAP] $'000 $'000 $'000
(audited) (audited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents 29,366 25,578 35,448
Restricted cash 5,607 3,651 5,439
Accounts receivable, net of allowance 2,136 2,768 4,632
for doubtful accounts
Prepaid expenses 3,873 2,604 919
Other current assets 3,890 2,990 8,809
Total current assets 44,872 37,591 55,247
Property, plant and equipment, net 5,630 7,555 6,470
Other non-current assets 512 1,432 52
Goodwill, net 20,400 18,433 20,691
TOTAL ASSETS 71,414 65,011 82,460
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft 699 - 966
Accounts payable 27,630 17,189 35,258
Accrued reservations liability (gross) 6,555 4,761 5,456
Accrued expenses and other current 9,662 19,350 13,399
liabilities
Total current liabilities 44,546 41,300 55,079
Shareholders' equity:
Ordinary shares of 14p par value - 11,281 9,535 10,899
issued and outstanding
Accumulated paid in capital 144,657 103,106 123,331
Accumulated deficit (128,536) (88,571) (106,948)
Accumulated other comprehensive loss (534) (359) 99
Total shareholders' equity 26,868 23,711 27,381
TOTAL LIABILITIES AND SHAREHOLDERS' 71,414 65,011 82,460
EQUITY
Exchange rate for the period end ($ 1.6095 1.4543 1.5610
per �)
CONSOLIDATED CASH FLOW STATEMENT Year Year Quarter Quarter
ended ended ended ended
31-Dec-02 31-Dec-01 31-Dec-02 30-Sep-02
$'000 $'000 $'000 $'000
(audited) (audited) (unaudited) (unaudited)
Cash flows from operating
activities:
Net (loss)/income: (30,511) (36,295) (17,801) 2,451
Adjustments to reconcile net
(loss)/income
to net cash used for operating
activities:
Depreciation and amortisation 7,317 12,564 2,093 1,705
Changes in :
Trade working capital (incl. 7,613 8,404 (4,462) 2,055
exchange adjustments)
Corporation tax
Stock compensation expense 22,092 522 16,514 (3,539)
Net cash provided from operating 6,511 (14,805) (3,656) 2,672
activities
Cash flows from investing
activities
Capital expenditure and (4,476) (4,319) (2,452) (123)
acquisitions
Increase in restricted cash (1,568) (2,097) (1,533) -
Net cash used in investing (6,044) (6,416) (3,985) (123)
activities
Cash flows financing activities:
Increase/(decrease) in bank loans 699 (109) (306) (254)
and overdraft
Proceeds from issuance of common 729 - 630 -
stock
Capital element of finance lease (1,664) 660 (2,188) -
Net cash provided from financing (236) 551 (1,864) (254)
activities
Effect of exchange rates on cash 827 514 (2,016) 766
Net increase in cash receipts 1,058 (20,156) (11,521) 3,061
Cash at the beginning of the 28,308 48,776 40,887 37,826
period
Cash at acquisition - 609 - -
Cash at the end of the period 29,366 29,229 29,366 40,887
Exchange rate for the period ($ 1.6095 1.4543 1.5740 1.5500
per �)
Reconciliation between UK and US
GAAP
For the quarter ended 31 December 2002 �'000
(unaudited)
Retained loss for the period 1 October 2002 to 31 (3,546)
December 2002
Reported in the consolidated profit and loss account for the period
under UK GAAP
Amortisation of 1,185
goodwill
Deferred revenue 75
Deferral of gain on asset (160)
disposal
Stock (9,999)
compensation cost
National 1,135
Insurance
Loss for the period 1 October 2002 to 31 December 2002 under (11,310)
US GAAP
$'000's
Loss for the period 1 October 2002 to 31 December 2002 under (17,800)
US GAAP*
*Translated in US $ at average exchange rate for the
period of $1.5740 per �1
For the year ended 31 December 2002(audited) �'000
Retained loss for the period 1 January 2002 to 31 December (12,487)
2002
Reported in the consolidated profit and loss account for the period
under UK GAAP
Amortisation of 4,761
goodwill
Deferred revenue 325
Deferral of gain on asset (160)
disposal
Stock (12,532)
compensation cost
National 1,135
Insurance
Loss for the period 1 January 2002 to 31 December 2002 under (18,958)
US GAAP
$'000
Loss for the period 1 January 2002 to 31 December (30,511)
2002 under US GAAP*
*Translated in US $ at the year end exchange rate for the
period of $1.6095 per �1
�'000
Shareholders' equity as reported in the consolidated balance sheet 13,854
under UK GAAP
Goodwill 2,396
Net assets of Carbookers 43
Limited
Deferred revenue (575)
Deferral of gain on asset disposal (160)
National 1,135
Insurance
Shareholders' equity as reported in the consolidated balance sheet 16,693
under US GAAP
$'000
Shareholders' equity as reported in the consolidated balance sheet 26,868
under US GAAP
Translated in US$ at the year end exchange rate for
the period of $1.6095 per �1
END
