Holidaybreak warns of a tough year ahead as uncertainty bites

The group said sales had been hit by January's snow storms and weak demand for overseas trips although its York-based hotel breaks business reported stable sales for UK short breaks.

The business has been helped by strong demand for popular theatre shows such as Lion King, Wicked and We will Rock You. This is in sharp contrast to demand for European destinations which remains weak.

Holidaybreak reported a two per cent sales fall between October and February 15 after seeing later booking patterns due to the poor weather.

It has also reduced capacity at its camping division, where sales are three per cent lower than last year.

The company, which offers short breaks within the UK and Europe, said it expects to perform in line with its estimates for the year to September 30.

Executive chairman John Coleman said: "Whilst trading in each of the group's divisions is encouraging, we expect the trading conditions over the coming year to remain challenging as a result of continuing economic uncertainty."

Altium Securities cut its price target on the company's shares to 340p from 360p, citing the "cautious tone of the state-ment".

The group's shares closed down 0.25p at 244p.

Holidaybreak said its education division, which accounts for about 26 per cent of its 2009 revenue, was not hurt much by the recession, but school closures due to bad weather in January had delayed bookings.

Bad weather also hit the performance of its hotel breaks unit, which accounted for 30 per cent of group sales in 2009.

The division's sales were down two per cent despite steady demand for UK short breaks.

The company said it continued its search for a new chief executive after Carl Michel stepped down from the post in September last year due to personal reasons.

Analysts at KBC Peel Hunt, which has a "buy" rating on the company's stock, said: "Currently, the lack of a chief executive is the key driver of the share price and a re-rating is unlikely until the vacancy is filled.

"Trading remains mixed, but this was not unexpected given the economic backdrop and later booking patterns."

They added that the key is how the group unlocks the value in what looks to be a "significantly undervalued" business.

The group, which offers everything from hotel breaks, school trips, camping and adventure holidays, said that demand for European destinations remained soft as the weaker pound hits holidaymakers in the pocket.

It reported a recent six per cent rise in sales in its adventure division, partly offset by a three per cent decline in camping as the group cut capacity.

Last year the group's York-based hotel breaks business reported an 18 per cent decline in full-year profits to 11.9m.

Bookings rose as a result of lower room rates and cheaper train fares, but profits fell.

The group reported pre-tax profits of 28.4m for the year to September 30, a drop of 13 per cent from the 32.6m seen a year earlier.

The education business was largely unaffected by the recession as parents are still prepared to make a sacrifice in order to send their children on educational trips.

Operating profits at the division, which runs outdoor trips and cultural tours under the PGL and NST brands, rose by 69 per cent to 10.5m.

In contrast, the Explore-branded adventure travel business posted losses of 6.7m after weaker demand caused revenues to fall by six per cent at constant exchange rates.

"The relatively high cost and aspirational nature of these trips means that they are more likely to be deferred in difficult times," said the group.

Holidaybreak's hotel breaks business in York employs around 230 people.

Helping with the great escape

Holidaybreak is an education, leisure and activity travel group listed on the London Stock Exchange.

The group's four operating divisions – education, hotel breaks, adventure travel and camping – have market leading positions in the UK and other major European markets.

It organises educational and activity trips for UK school children and short breaks in the UK and Europe, worldwide adventure holidays and mobile-home and camping holidays on sites throughout Europe.

The company was founded by Alan Goulding in 1973 as Eurocamp Travel Limited, a family-run business offering camping holidays in Brittany.

Following a management buyout in 1988, Eurocamp was floated on the London Stock Exchange in 1991. Over the next few years, the reach of the Eurocamp brand was extended into several new territories.

In the mid-1990s, the group expanded through several acquisitions within the holiday sector, including the 1995 merger with Superbreak.

In 1998, the company's name changed to Holidaybreak.