, the online travel company, saw its shares plunge 12 per cent yesterday when it said the Iraqi war was affecting bookings from Britain.
The company said the start of hostilities on 19 March would have an impact on its sales and profitability for the remaining days of its first quarter, which ends at the end of this month. Its shares, one of the best performers on the stock market last year, fell 30p to 220p. They have now almost halved in less than three months.
Founder and chairman Dinesh Dhamija
said bookings to the Middle East had dried up almost completely while Egypt and Cyprus were also suffering. However, bookings to the Caribbean had held up and trips to the United States were performing surprisingly strongly. However, he said the company`s decision to move more back-office operations to India would cut costs and mean that ebookers still expected to report a satisfactory first quarter.
“We think people are delaying [bookings] but they will still take their holidays,” Mr Dhamija said. “There was a great bounce-back after 11 September and after the first Gulf War. I hope it will be the same this time. I`m surprised by the stock market`s reaction.”
Rachael Waring, an analyst at Numis Securities, said: “Ebookers is a long-haul operator and therefore is bound to feel the full effect of the conflict given many consumers will switch to short-haul breaks or remain in the UK.”
Ebookers has moved many back-office functions to India, including email sales, customer service and accounting, in an effort to save costs. It now has 370 staff in Delhi with capacity for 800. The shift has helped ebookers cut its cost-to-sales ratio from 20 per cent to 12 per cent in the past year as the Indian operations are exempt from corporate income tax until 2010 and wages are lower. Mr Dhamija said there was more to come and that it hoped to turn its Indian operations into a profit centre by contracting them out to third parties which would then pay a fee to the company.
The warning on slowing sales overshadowed the group`s full-year results, which showed reduced annual losses before tax at £12.3m for the year to December. This compared with losses of £25.6m the previous year. Gross sales rose 52 per cent to £273m.
Ebookers said January`s £55m acquisition of Travelbag
, the long-haul travel specialist, was being integrated in line with expectations. It is expected to yield £5m of annualised cost savings. The deal was part of ebookers` plan to achieve £1bn of annualised sales during 2004. Mr Dhamija said other deals were unlikely until his company had proved it could become profitable at the pre-tax level. This is expected to happen in the second quarter of this year.
The group`s house broker, Evolution Beeson Gregory, cuts its full-year profit forecast from £20m to £16m.