Insight: Youtravel profits to rise, but expansion is on hold

Bed bank will make “significant” profit this year but has admitted expansion plans are on hold as it focuses on existing business to ride out the recession.

Group managing director Graham Nichols said group profit for the year ending October 2009 “won’t just be a few €100,000” and would represent a significant  turnaround on its first year, when it posted a £900,000 loss.

But he admitted profit would fall short of budgeted figures. “We hope to make a significant profit, but it might be slightly less than we forecast because we budgeted aggressively in October 2008,” he said.

He added: “It is not surprising [for a start-up] to make a loss in the first year. Last year our turnover was more than €110 million and our passenger numbers were just under 500,000. Our profit will just break even for the year ending October 2008.”

He said shareholder Barclays Ventures continued to support the business, now in its third year.

However, plans to expand the business by moving into new product areas – the group’s strategy six months ago – have been curtailed because of the economic downturn.

Further expansion into the cruise market, following its partnership with easyCruise, have been put on ice. He said: “We did have some discussions [with cruiselines] but these are on the back burner at the moment to focus on the main business. It’s time to focus and expand what we have.”

He admitted city breaks, another area the group earmarked for growth, have been hit by the economic downturn.

Any growth this year for the business is likely to come mainly from the group’s existing international markets, which enjoy double-digit margins but only made up 10% of turnover last year.

International business is up 80% year on year from a relatively small base, but sales are predicted to rise to 20% this year.

In contrast, has revealed it is unlikely to see much growth from its core UK market.

Sales director Paul Riches added: “We budgeted to achieve a bit of growth in the UK. I am not saying this is impossible but it will be difficult this year.

“We will certainly end up in line with last year in terms of the UK business, and with some new accounts on board we could still see some expansion.”

The group said some new agency accounts had been set up as a result of Thomas Cook’s acquisition of Med Hotels because agents wanted to work with more than one company in the bed bank sector.

But predictions that Thomas Cook would drive up bed bank margins have yet to materialise, added Riches. “It’s as competitive as it’s ever been,” he said.

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