MyTravel’s Future in doubt as share price tumbles

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 Crossland, due to address the 1,600-strong delegation, has been replaced by Thomas Cook UK chief executive Alan Stewart.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.