A strategic review of luxury group Western & Oriental’s travel division is being conducted on the back of a profit warning.
The company said the review was aimed at maximising shareholder value following costs of £1.8 million as a result of disruption caused by the Icelandic volcanic ash alert in April.
W&O, which has brands including W&O Travel, Key2holidays, Regent Holidays and Iceland2go, said it had to pay for the repatriation of stranded holidaymakers, was hit by booking cancellations and lost sales as customers changed their normal booking patterns.
Margins were also affected by the need to stimulate sales and be competitive “under extreme trading conditions”.
The company said: “Customers were looking for material price reductions in a market which was far more competitive than normal.”
However, forward bookings are currently higher at £21 million against £18.5 million last year, the company said in a trading statement following the close of its financial year on September 30.
Following a slow start to the year, sales within the company’s events division have improved across a number of sectors, particularly in its specialist pharmaceutical sector.
“Despite continuing challenging conditions due to a number of external factors faced by the business during 2010, such as the ash cloud, airline strikes and lengthy political unrest in Thailand, the board is pleased with the overall performance of the business,” the statement said.
“However, due to the unprecedented effect on trading caused by the ash cloud, the board expects that the group will be behind market expectations at EBITDA level for the financial year to 30 September 2010.”
Chairman David Howell said: “Following the difficulties faced in the second half of the year, trading has started to return to more normalised levels in the W&O travel division, albeit that margins have remained under pressure.
“With an improved economic outlook, the W&O events division has seen increased confidence in both enquires and bookings in recent weeks across all sectors.
“Whilst economic recovery must still be viewed with some caution, the group moves into the new financial year with a forward order book which is over 13% ahead when compared with 12 months ago and the board is anticipating improved trading conditions and EBITDA performance in the next financial year.”
Trading conditions during the first six months, coupled with the share price performance over recent months, has caused the board to conduct the travel division strategic review, the outcome of which will be known before the end of the year, Howell added.