Travel group forced to monitor cash flow

Sep 30 2008 by Tony McDonough, Liverpool Daily Post

TRAVEL group Holidaybreak admitted yesterday that it was having to monitor its cash position closely as the credit crunch pushes up the interest rate on its borrowings.

In May, the Cheshire firm completed a £275m refinancing package from a syndicate of six banks led by Barclays and the Royal Bank of Scotland. It agreed the five-year facility at an initial rate of 130 basis points over Libor.

Libor (London Interbank Offered Rate) is the interest rate at which large banks are willing to lend each other money on a short-term basis.

When agreeing credit terms with companies and individuals, the banks will add percentage points on top of that rate, which is how they make their profit.

The turmoil in the international banking sector last week pushed the Libor rate beyond 6%, the highest since December last year.

In a trading statement, the firm said: “The continued high level of Libor has increased the group’s interest charge and this may continue into 2008/09. Year-end net debt is expected to be approximately £160m.

“The group continues to manage its cash and borrowings, mindful of current trading conditions.”

Holidaybreak said trading was “broadly in line with expectations”, but said it had also lost around £300,000 as a result of exposure to the failed tour group XL.

Subsidiary operation Hotel Breaks saw sales for 2007/08 rise 5%, although business slowed markedly after May at another subsidiary Superbreak. For 2008/09, the division is currently experiencing a fall in bookings of about 11%.

The firm said this reflected weaker demand into London, where hotel leisure rates have not yet declined, and there are fewer big hit theatre shows and exhibitions compared to this time last year.

Adventure Travel sales for 2007/08 are up 3%, camping by 1% and in the education division by 9%. Higher fuel costs had impacted on margins, the company added.

Holidaybreak’s specialist diving holiday division, RegalDive, has been hit by costs in the region of £300,000 due to the demise of XL. For 2008/09, the division is seeing revenue growth of around 5%.

Chief executive Carl Michel said: “Although the general economic environment is difficult, I am pleased that the spread and diversity of our businesses gives resilience to the group's trading performance.”

tonymcdonough