MyTravel has updated the market on its expectations for the full year, in view of the recent UK travel security alert and the terrorist incidents in Turkey and Jordan, which have compounded an already difficult summer.Notwithstanding these difficulties and year on year fuel and foreign currency increases which management estimates at circa £50 million, the Board expects the Group to report a profit before tax of £40-45 million (2005: £17.4 million loss), on an operating profit of £55-60 million. This will be the Group’s first profit before tax since 2001. However, the UK business, which has experienced the most difficult trading environment, is no longer expected to return to profitability this year. Despite substantial and continuing progress in turning around the business, the effect of recent events is that the UK performance is expected to improve from a £27.4 million operating loss in 2005 to a £10-15 million loss this year.
In response to difficult market conditions in the UK, the company accelerated its cost reduction programme and now expects to significantly exceed its targeted reduction for the year in SG&A costs, which was £30-40 million. The actions we have taken are not expected to fully mitigate the price and margin erosion in the summer 2006 market.
MyTravel Chief Executive Peter McHugh said: ‘We expect to make a profit before tax of £40-45 million this year - our first since 2001 - an improvement over last year of some £57-62 million. We continue to make significant progress, despite difficult summer markets, particularly in the UK. While we are disappointed that we will not achieve this year’s target in the UK, we are taking the actions required to complete the turnaround. We believe that the UK will return to a more typical trading environment in 2007 and we continue to target a 3.5% margin in the UK in 2007.’