THE City has insisted MyTravel
chairman David Crossland apologise for his mistakes and ask investors for help
after a third profits warning in five months.
Analysts heaped blame on the
chairman as MyTravel predicted a further £50 million would be wiped off
end-of-year profits. Investors said Crossland should bear the brunt of
responsibility as shares fell from 75.5p to a low of 13p, indicating MyTravel
was on the brink of collapse.
Options for the company include a
takeover or selling off parts of the business. Serious concerns have been
raised as to how MyTravel will pay off its debts, including a £230 million
convertible bond due up in January 2004 and a £250 million revolving loan due
in March.
The news led to MyTravel scaling
down its ABTA delegation in Cairo “quite considerably”. Crossland, UK managing
director of distribution and charter tour operations Steve Endacott and
MyTravelLite MD Tim Jeans immediately pulled out to concentrate on the
business. Crossland, due to address the 1,600-strong delegation, has been
replaced by Thomas Cook UK chief executive Alan Stewart.
In response to MyTravel’s ‘financial
uncertainty’, TUI de-racked all the group’s products, while Thomas Cook is
reviewing the situation.
Meanwhile, analysts at City bank
Morgan Stanley issued a warning bookings could dry up when the news hits the
public, with cancellations of MyTravel’s nil deposit holidays likely. It
questioned the company’s ability to cover its £480 million debt. As
holidaymakers were forced to leave Bali after the bomb attacks, there were
further fears customers could lose faith in the package holiday industry as a whole.
The City also showed little
confidence in the new appointments of MyTravel North America chief executive
Peter McHugh to group chief executive, replacing Tim Byrne, and the promotion
of European chief executive Philip Jansen to group chief operating officer. The
latest MyTravel warning puts the extra £50 million loss down to:
* A £12 million over-estimation of
September profits. This concerns profits from the Holidayline call centre,
shops and sales of late Sundeals.
* An allocation of £8 million being
“counted twice” in regards to individual businesses by the head office in
Rochdale.
* Revised “worse case scenario”
figures of £15 million-£30 million less profit as a result of changing
accounting practices. MyTravel’s profits for the year ending September 30 2002
are predicted to be £40 million-£45 million, but some forecasts are as low as
£20 million. This compares to £140 million profits anticipated in May this
year. A leading analyst said: “Crossland has got to eat humble pie if MyTravel
is to survive. If he listens to good advice, he may be able to save the
company.”
But analysts said MyTravel could
keep trading if top management was “radically overhauled” and financial
investors secured. “All the problems stem from head office not the industry,” said
one.
MyTravel’s 27,000 staff worldwide
have received letters from Crossland describing this as a “share price issue”
not a cash-flow problem. Sources said jobs cuts were not planned but neither
losses nor shop closures have been ruled out.
Observers
hinted MyTravel could be the “next ILG”. The International Leisure Group’s 1991
demise followed a similar dramatic fall in share price after a sharp decline in
demand for holidays and airline seats as a result of the Gulf War.