29th Jan 2007 07:01
Travelzest plc29 January 2007 Date: 29 January 2007On behalf of: Travelzest plc ("Travelzest" or "the Group")Embargoed until: 0700hrs Travelzest plcPreliminary results for the year to 31 October 2006 Travelzest plc, the British online travel group offering specialist travelprogrammes, is pleased to announce its preliminary results for the year ended 31October 2006. Financial highlights • Total transaction value increased 261% to £44.1 million (2005: £12.2 million) • Turnover increased 70% to £19.2 million (2005: £11.3 million) • Profit before tax and goodwill amortisation increased 1,066% to £863, 000 (2005: £74,000) • Profit before tax increased 597% to £404,000 (2005: £58,000) • Normalised diluted earnings per share (adding back goodwill amortisation) increased 290% to 4.25 pence (2005: 1.09 pence) • Gross profit percentage increased to 37.8% from 26% in 2005 Operational highlights • Acquisition of iTravel2000.com in October 2006, Canada's largest pure online travel retailer, providing counter-seasonal revenues to the predominantly summer based revenues of Travelzest's businesses in Europe • Acquisition of three specialist UK travel companies: Best of Morocco (November 2005), Peng Travel (May 2006) and Fair's Fare (June 2006). All have made a positive contribution to the Group's results for the year • Launched Faraway Holidays, a long haul tour operator, as a start-up in August 2006 • Strong organic profit growth achieved in the Group's founding business, VFB Holidays • Colin McKinlay, formerly Chief Financial Officer for Thomas Cook UK & Ireland, appointed as Group Finance Director in April 2006 Post period end events • Tapestry Travel Limited acquired in December 2006 and relaunched as The Tapestry Collection, specialising in programmes to Turkey and Crete • Wow House Limited acquired in December 2006, offering an exclusive portfolio of large, prestigious houses to rent for short breaks in the UK • Holiday.co.uk and flight.co.uk websites to be relaunched imminently with enhanced content and functionality • Mark Molyneux, a former Managing Partner of Ernst & Young in the UK, succeeded Mike Bruce-Mitford as Chairman in December 2006 • Nishma Robb, Group Distribution Director, joined the Board in December 2006, highlighting the importance of the Group's online distribution strategy Commenting on the results, Chris Mottershead, Chief Executive of Travelzest,said: "Within 12 months a considerable increase in profit has been achieved. Focusingon the key growth opportunities in the travel industry - specialist touroperations and online distribution - growth has been driven initially byacquisition and with eight businesses already under the Travelzest umbrella, thefoundations are in place to achieve sustained profitable growth. We look forwardto the coming year with confidence and to delivering the full year benefit ofthe acquisitions made during 2006." Enquiries to: Travelzest plc 020 7747 7231Christopher Mottersheadwww.travelzestplc.com Redleaf Communications 020 7822 0200Emma Kane / Samantha Robbins / Duncan McCormick Chairman's statement The year to 31 October 2006 is the first full year of trading following theTravelzest Group's admission to the Alternative Investment Market ("AIM") inOctober 2005. In this year, Travelzest has delivered a record profit and made aseries of targeted acquisitions creating a strong platform for future growth. Results The Group has achieved a record profit before tax and goodwill amortisation of£863,000, 1,066% higher than the previous year, on a growth in total transactionvalue of 261% to £44.1 million. Profit before tax increased by 597% to £404,000and the resulting earnings per share increased by 28% to 1.04 pence. Normaliseddiluted earnings per share (adding back goodwill amortisation) increased by 290%from 1.09 pence to 4.25 pence. The Group will continue to invest the cashgenerated from operations into its future development and consequently nodividend is proposed. The results are particularly pleasing as they have been achieved in a year oftransformation with significant acquisition activity. A description of the performance of the Group's operating companies is given inthe Chief Executive's Statement. Strategy The travel market has changed significantly in the last five years providingexciting new opportunities for growth. The catalyst for this change is the internet. Travellers are increasingly happy to buy flights and accommodation directly fromsuppliers via the internet, especially where they are familiar with thedestination. As travellers become more adventurous, stimulated by the internet,they are seeking more specialist and niche holiday experiences. Theseexperiences might be, for example, travelling further afield or engaging in aparticular interest or hobby whilst on holiday or demanding a higher level ofservice support. These specialist markets have traditionally been serviced by smaller,independent travel companies. To be successful in these markets, the companiesneed a genuine and deep understanding of the holiday experiences they sell andbe able to promote themselves effectively via the internet. These smaller companies are often under-capitalised and unable to take advantageof the burgeoning opportunities in their market place. In addition, smallerindependents often lack the ambition and financial resources to grow beyond acertain size and profitability. They may also lack access to an effective onlinedistribution channel. As a result, they cannot gain the efficiencies of scalewhich being a large business or a member of a bigger organisation can provide. Travelzest has a simple strategy to capitalise on the changes taking place inthe travel market. We aim to build a group of companies offering specialist travel and holidayexperiences where the internet provides an efficient means of communicating andtransacting with customers. By providing management expertise, financialinvestment, cross-selling opportunities and group buying discounts, we willenable these businesses to be more successful and profitable than if they wereindependent. We believe in a small head office which determines strategy, provides resource,sets objectives but leaves local management motivated to run their businesses. We also believe in balancing our portfolio by having businesses which makeprofit at different times of the year. This avoids the problem which faces somany travel businesses of having all their profits and cash flow dependent uponjust a few months' performance. Acquisitions The Group successfully acquired four businesses during the year - Best ofMorocco (November 2005), Peng Travel (May 2006), Fair's Fare (June 2006) andiTravel2000.com (October 2006). I am very pleased with the way in which thesebusinesses have performed since acquisition. iTravel2000.com is Canada's largest pure online travel retailer. Like all ouracquisitions, the business has significant potential for growth. The majority ofiTravel2000.com's business is winter-based. This has the significant advantageof balancing the predominantly summer-based revenues of Travelzest's businessesin Europe. The acquisition also provides further opportunities to promote ourspecialist travel programmes to the Canadian market. In August 2006, the Group launched a new long haul tour operator, FarawayHolidays. The business has considerable potential to establish itself in agrowing and high value market. Following the year end, the Group acquired Tapestry Travel Limited whichspecialises in programmes to Turkey and Crete. In December 2006 we announced theacquisition of Wow House Limited, which offers an exclusive portfolio of large,prestigious houses to rent for short breaks in the UK. People The Travelzest concept was created by Chief Executive Chris Mottershead early in2005. He was formerly Managing Director of TUI UK, owner of Thomson Holidays andLunn Poly, and is a leading travel industry expert with a proven record ofdelivery. Chris has worked tirelessly this year, leading and building yourbusiness. In pursuit of our strategy, Travelzest has recruited some of the mostprofessional and talented people in the travel industry. Colin McKinlay joined the Board in April 2006 as Group Finance Director.Formally Chief Financial Officer for Thomas Cook UK & Ireland, Colin hasconsiderable experience of growing and developing travel businesses. Nishma Robb joined Travelzest in April 2006 as Group Distribution Director andjoined the Board in December 2006. Previously Managing Director of TeletextHolidays she successfully led that business through the transition from analogueto digital technology. Nishma's appointment to the Board is a measure ofTravelzest's commitment to its online distribution strategy. I joined the Group as a non executive Director in October 2006, havingpreviously been a Managing Partner of Ernst &Young in the UK. In December 2006 Mike Bruce-Mitford retired as non executive Chairman andstepped down from the Board. I succeeded Mike as non executive Chairman andwould like to extend the Board's thanks to Mike for the contribution he made asChairman to Travelzest. I would also like to thank my fellow non executiveDirectors, Richard Hall and Peter Thomson for their contribution to the Groupduring the year. Whilst excellent senior leadership is essential to deliver a successfulbusiness, the enthusiasm and commitment of everyone who works for us is equallyimportant. I would like to thank everybody in the Group for their hard work anddedication throughout the last 12 months. Outlook Our ambition for the year to 31 October 2006 was to acquire and start businessesthat had the potential to grow quickly under our ownership and complemented ourstrategy. I am pleased that we have done this successfully. In the coming year, we will focus on developing each of the businesses in theTravelzest Group. We will also consider further acquisitions which broaden therange of holidays offered to our customers. We look forward to the coming yearwith confidence. Mark T J MolyneuxChairman26 January 2007 Chief Executive's statement I am very pleased to report that Travelzest has achieved the objectives it setitself at the beginning of the financial year. These were firstly, to improvethe performance of the businesses in the Group at the start of the year.Secondly, acquire or start up new businesses to generate the opportunity forsignificant future profit. Finally, to attract and recruit the very best travelprofessionals in the industry in order to maximise the potential that all ourbusinesses offer. Continuing businesses VFB Holidays, the Group's founding business, provides a range of specialistholidays principally to France. The core revenue of the business hastraditionally been generated from the sale of French cottage holidays. In 2006we achieved significant growth in two particular areas, namely river cruiseholidays and short breaks that specialise in providing themed excursions. I amparticularly pleased with the performance of VFB Holidays as in 2004 this was abreakeven business. Following a number of changes to the business model VFBHolidays achieved strong profit growth in 2006. Holiday Express, which operates the websites www.holiday.co.uk andwww.flight.co.uk, has undergone a year of development and exciting new websiteswill be launched imminently. www.holiday.co.uk moves from being a third partypackage holiday distributor to a full service online holiday portal providing abroad range of holidays, including dynamic packaging and access to the contentof the Group's specialist tour operators. www.flight.co.uk has undergone asimilar transformation and is expected to grow volumes during 2007 as well asprovide purchasing benefits to the Group's specialist businesses. During the year the corporate team was strengthened with the addition of a fulltime Finance Director, Colin McKinlay and Group Distribution Director, NishmaRobb. Whilst this has increased our cost base it enhances the skills andexperience of the central management team. Furthermore, additional central costshave been incurred with the growth and development of the Group. The centralinfrastructure is now sufficient to meet the Group's demands for the foreseeablefuture. New businesses The Group acquired a number of specialist businesses which fit with ouracquisition criteria. All of these acquisitions have made a positivecontribution to the Group's results for the year. Best of Morocco specialises in high quality, tailor-made holidays to Morocco forindividuals or small groups. It is also the premier agent for the Marathon desSables, a foot race that takes place in the Sahara in April each year. Thecombination of these activities creates a sales cycle that generates profits inthe winter and summer months. Best of Morocco was acquired in November 2005 andhas completed a successful 11 months post acquisition trading. Peng Travel was formed in 1971 to arrange naturist holidays for the UK market.Since then, it has grown to become Britain's biggest naturist tour operator andhas unrivalled experience of its market. The business was acquired in May 2006and has made encouraging progress in the post acquisition period. Fair's Fare was established in 1995 and is one of the UK's leading firms ofairfare analysts, offering a unique travel planning service to both private andbusiness clients. The company seeks out the very best financial options, on allmajor airlines, primarily for long-haul travellers in the first and businessclass cabins of the world's leading airlines. I am very pleased with thecontribution this business has made to the Group's results since it was acquiredin June 2006. In August 2006 we launched Faraway Holidays (www.farawayholidays.co.uk),specialising in tailor-made holidays to many of the world's top exoticdestinations. The management of this business has extensive experience ofproviding high quality holidays at great value for money. The start up has beenfunded from existing cash resources. The acquisition of iTravel2000.com in October 2006 significantly changed thesize and shape of the Group. The Canadian market is counter cyclical to the UKand as a result the business generates the majority of its profits and cash inthe winter period. In addition, the market does not have the same level ofvertical integration when compared to the UK. iTravel has capitalised on this tosecure its position as the largest pure online travel retailer in Canada. iTravel2000.com has significant organic growth potential which will be generatedby the introduction of its own dynamic packaging system. In addition, bycreating a link to the specialist content provided by the UK tour operatingbusinesses there is an opportunity to expand the accessibility of specialistholidays to the Canadian market. Following the year end, the Group acquired Tapestry Travel Limited whichspecialises in selling holidays to Turkey and Crete. In December 2006 weannounced the acquisition of Wow House Limited which offers an exclusiveportfolio of large, prestigious houses to rent for short breaks in the UK. Group performance and key indicators Total transaction value, (being the gross value of holidays sold by the Group'stour operators and online travel agents), increased by 261% from £12.2 millionto £44.1 million. Turnover increased 70% to £19.2 million from £11.3 million in2005 with the resulting profit before tax and goodwill amortisation increasingby 1,066% from £74,000 to £863,000. Profit before tax increased by 597% to£404,000 (2005 £58,000) and earnings per share increased by 28% from 0.81 penceto 1.04 pence. Normalised diluted earnings per share (adding back goodwillamortisation) increased by 290% from 1.09 pence in 2005 to 4.25 pence this year. The number of passengers carried by the Group's tour operators and bookedthrough our online distribution channels, during the period these companies werepart of the Group, increased by over 300% to over 98,000. I am pleased to reportthat the gross profit percentage has increased to 37.8% from 26% in the previousyear. This reflects the acquisition of high margin businesses during the yearand an improved performance in VFB Holidays. At the end of the financial year the Group employed 282 staff compared with 107staff at the end of the previous year. Financing The Group completed two share placings during the course of the year. The firstin June 2006 raised £2.6 million (before expenses) and the second in October2006 raised £5.3 million (before expenses). The proceeds were used to financeacquisitions and for working capital requirements. In addition the Group raised £11 million in October 2006 through a debt facilityprovided by Barclays Corporate Leveraged Finance to fund the cash element of theiTravel2000.com purchase consideration. International Financial Reporting Standards ("IFRS") As an AIM listed business Travelzest will report under IFRS in the financialyear ending 31 October 2008 with comparative information. Planning is underwayto achieve this. In 2007 the Group's results will include for the first time theeffect of FRS 20 Share Based Payment. Summary Having built the key foundations for the Group in 2006, Travelzest is wellpositioned to drive profitable growth. We look forward to the coming year withconfidence and to delivering the full year benefit of the acquisitions madeduring 2006. Chris MottersheadChief Executive26 January 2007 Consolidated profit and loss account 2006 2005 Note £000's £000's Total transaction value 1Continuing operations 26,147 11,141 - Acquisitions 17,936 1,075 --------- -------- 44,083 12,216 ========= ======== Group turnover 1Continuing operations 13,840 11,141 - Acquisitions 5,349 151 --------- -------- 19,189 11,292 Cost of sales (11,937) (8,352) --------- --------Gross profit 7,252 2,940 Administrative expenses (7,000) (3,007) --------- -------- Operating profit/(loss) Continuing operations (679) (38) - Acquisitions 931 (29) --------- -------- 2 252 (67) Net interest receivable 152 125 --------- --------Profit on ordinary activities before taxation 404 58 Tax on profit on ordinary activities 3 (297) (32) --------- -------- Profit for the financial year 107 26 ========= ========= Earnings per share 4Basic 1.04p 0.81pDiluted 0.80p 0.70p ========= ========= Consolidated balance sheet 2006 2005 Note £000's £000'sFixed assetsIntangible fixed assets 36,106 3,916Tangible assets 2,016 699 --------- -------- 38,122 4,615Current assetsStock 2 -Debtors 3,496 549Cash at bank and in hand 10,989 5,753 --------- -------- 14,487 6,302Creditors: amounts falling due within one year (8,377) (2,979) --------- --------Net current assets 6,110 3,323 --------- --------Total assets less current liabilities 44,232 7,938 Creditors: amounts falling due after more than one year (18,198) (1,214) Provisions for liabilities and chargesDeferred taxation (314) (18) --------- -------- 25,720 6,706 ========= ========Capital and reservesCalled-up equity share capital 5 313 162Share premium account 6 11,632 4,442Exchangeable shares 5 10,003 -Merger reserve 6 2,320 799Profit and loss account 6 1,452 1,303 --------- --------Shareholders' funds 7 25,720 6,706 ========= ======== Consolidated cash flow statement 2006 2005 Note £000's £000's Net cash inflow/(outflow) from operating activities 8 1,520 (132) --------- --------Returns on investments and servicing of financeInterest received 217 126Interest paid (65) (1) --------- --------Net cash inflow from returns on investments and servicing of finance 152 125 --------- --------Taxation (323) (3) --------- --------Capital expenditurePurchases of tangible fixed assets (409) (36)Receipts from sale of fixed assets - 5 --------- -------- Net cash outflow from capital expenditure (409) (31) --------- --------AcquisitionsPurchase of subsidiary companies (16,730) (1,815)Net cash acquired with subsidiary companies 2,998 1,361 --------- -------- Net cash outflow for acquisitions (13,732) (454) --------- --------Cash outflow before financing (12,792) (495) --------- -------- FinancingIssue of equity share capital 7,317 4,525Loans 10,741 - --------- --------Net cash inflow from financing 18,058 4,525 --------- -------- Increase in cash 8 5,266 4,030 ======== ======== Statement of total recognised gains and losses 2006 2005 £000's £000's Profit for the financial year 107 26Exchange difference arising on consolidation 42 - -------- --------Total gains and losses recognised in the period 149 26 ======== ======== Notes 1 Segmental and geographical Total transaction value represents the gross value of business carried out bythe Group during the year and is derived as follows: Total transaction value 2006 2005 £000's £000'sTour operations 15,631 11,141Travel agency: Direct sales 349 12 Agency sales 28,103 1,063 ---------- ---------- 44,083 12,216 ========== ========== Turnover 2006 2005 £000's £000'sTour operations 15,631 11,141Travel agency: Direct sales 349 12 Agency sales 3,209 139 ---------- --------- 19,189 11,292 ========== ========= The total transaction value and turnover was attributable to the principalactivities of the Group, which originate in: 2006 2005 Turnover Profit before Net Assets Turnover Profit before Net Assets tax tax £000's £000's £000's £000's £000's £000'sUnited Kingdom 18,658 186 24,586 11,292 58 6,706Canada 531 218 1,134 - - - ----------- -------- ----------- ---------- ---------- --------- 19,189 404 25,720 11,292 58 6,706 =========== ======== =========== ========== ========== ========= 2 Operating profit/(loss) Operating profit/(loss) is stated after charging/(crediting): 2006 2005 £000's £000'sAmortisation of goodwill 459 16Depreciation of owned fixed assets 147 74Loss on disposal of fixed assets 1 -Auditors' remuneration - group: Audit fees 74 41 Taxation 12 7Auditors' remuneration - company: Audit fees 5 7 Taxation 2 -Net loss/(profit) on foreign currency translation 4 (8)Operating lease costs: Office equipment 44 - Vehicles 14 24 Property 189 71 ======== ======= 3 Taxation on ordinary activities (a) Analysis of charge in the year 2006 2005 £000's £000'sCurrent tax:UK corporation tax based on the results for the year at 30% (2005 - 30%) 185 36Overseas taxation 69 -Under provision in prior year 27 - -------- -------Total current tax 281 36Deferred tax:Origination and reversal of timing differences 16 (4) -------- -------Tax on profit on ordinary activities 297 32 ======= ======= (b) Factors affecting current tax charge 2006 2005 £000's £000'sProfit on ordinary activities before taxation 404 58 ======== =======rofit on ordinary activities multiplied by the standard rate of corporation tax 121 18in the UK of 30% (2005 - 30%)Amortisation of goodwill not deductible for tax purposes 138 5Depreciation for the year in excess of capital allowances 57 9Short term timing differences - (2)Utilisation of tax losses (29)Other adjustments (42) 6Differences between UK and overseas rate 9 -Adjustment to prior years tax 27 - -------- --------Total current tax (note 6(a)) 281 36 ======== ======== 4 Earnings per share Basic earnings per share is based on an equity gain of £107,000 (2005 - gain of£26,000) and 10,282,082 (2005 - 3,328,993) shares of 2p, being the averagenumber of shares in issue during the year, including exchangeable shares. The diluted earnings per share is based on average fully diluted share capitalof 13,312,212 shares (2005 - 3,843,019 shares) derived as follows: Average numberIssued ordinary shares and exchangeable shares 10,282,082Share options 301,498Warrants 2,728,632 ----------- 13,312,212 ========== 5 Share capital Authorised share capital: 2006 2005 £000's £000's59,550,000 ordinary shares of £0.02 each (2005 - 25,000,000 shares) 1,191 500450,000 deferred shares of £0.02 each 9 9 ======== ======= Allotted, called up and fully paid: 2006 2005 No £000's No £000'sOrdinary shares of £0.02 each 15,670,784 313 8,122,233 162 ============= ======= ============= ======= The Company issued shares during the year as follows: On 31 January 2006, 355,901 ordinary 2p shares as part settlement of deferredconsideration for the purchase of the Holiday Express Group at a premium of119.7p per share. On 14 February 2006, 40,000 ordinary 2p shares for cash at a premium of 123.5pper share. On 05 May 2006, 317,951 ordinary 2p shares at a premium of 127.65p per share, aspartial consideration for the acquisition of Peng Travel Limited (see note 9 forfurther details). On 10 June 2006, 542,636 ordinary 2p shares at a premium of 127p per share, aspartial consideration for the acquisition of The Montpelier Collection Limited(holding company of Fair's Fare Limited - see note 9 for further details). On 10 June 2006, a further issue was made of 2,085,714 ordinary 2p shares forcash at a premium of 124p per share On 06 October 2006, 4,206,349 ordinary 2p shares for cash at a premium of 124pper share. Of the £8,711,443 total premium on issue of these shares (net of share issueexpenses) £7,040,533 has been credited to the share premium account. Thebalance of £1,521,025 being the premium on shares issued as partialconsideration for the acquisitions of Holiday Express Group Limited, Peng TravelLimited and Fair's Fare Limited qualifies for merger relief and has thereforebeen charged to the merger reserve. Share Options On 05 December 2005, the Company granted share options over 72,727 ordinary 2pshares at an exercise price of 137.5p per share. The options form part of anapproved EMI scheme. On 31 January 2006, the Company granted share options over 81,632 ordinary 2pshares at an exercise price of 122.5p per share. 40,489 of the options form partof an approved EMI scheme. On 3 April 2006, the Company granted share options over 156,862 ordinary 2pshares at an exercise price of 127.5p per share. 78,431 of the options formpart of an approved EMI scheme. On 19 April 2006, the Company granted share options over 77,220 ordinary 2pshares at an exercise price of 129.5p per share. The options form part of anapproved EMI scheme. On 6 October 2006, the Company granted share options over 31,496 ordinary 2pshares at an exercise price of 1.27p per share. The options form part of anapproved EMI scheme. All share options must be exercised between 3 and 10 years of the date of grant. Exchangeable Shares 0763756 BC Limited, an indirect wholly owned subsidiary of Travelzest plc,issued 7,938,780 exchangeable shares on 13 October 2006 as part considerationfor the acquisition of iTravel2000.com at £1.26 per share. These shares arerequired to be exchanged on a one for one basis for ordinary 2p shares inTravelzest within 5 years of completion of the Acquisition (13th October 2006).The exchange of the shares is not dependent on any other external factors. If all the exchangeable shares were to be exchanged then the holders of theexchangeable shares would account for 33.6% of the shareholders. Warrants During the year the Company issued the following warrants: Date of Grant Number Issued Exercise Price 2 December 2005 18,182 137.5p 31 January 2006 109,383 122.5p 14 February 2006 10,000 125.5p 3 April 2006 39,216 127.5p 19 April 2006 19,305 129.5p 5 May 2006 79,488 129.65p 10 June 2006 657,088 127.5p 6 October 2006 2,110,453 126.0p The subscription rights attached to each warrant in issue must be exercisedwithin 10 years of the date of grant. 6 Reserves Group Share Premium Merger reserve Profit and loss Account account £000's £000's £000's At 1 November 2005 4,442 799 1,303Profit for the year - - 107Premium on shares issued 7,190 - -Merger relief on issue of new shares - 1,521 -Exchange difference arising on consolidation - - 42 ------------ ---------- -----------At 31 October 2006 11,632 2,320 1,452 ============ ========== =========== 7 Reconciliation of movements in shareholders' funds Group 2006 2005 £000's £000's Profit for the financial year 107 26Issue of shares 18,865 5,311Exchange difference arising on consolidation 42 - ---------- ---------Net addition to shareholders' equity funds 19,014 5,337Opening shareholders' equity funds 6,706 1,369 ---------- ---------Closing shareholders' equity funds 25,720 6,706 ========= ========= 8 Notes to the statement of cash flows Reconciliation of operating profit/(loss) to net cash inflow/(outflow) fromoperating activities 2006 2005 £000's £000'sOperating profit/(loss) 252 (67)Amortisation 459 16Depreciation 147 74Loss on disposal 1 -Decrease in stock 1 -Increase in debtors (571) (50)Increase/(decrease) in creditors 1,243 (105)Cash exchange differences taken to reserves (12) - --------- --------Net cash inflow/(outflow) from operating activities 1,520 (132) ========= ======== Reconciliation of net cash flow to movement in net funds 2006 2005 £000's £000'sIncrease in cash in the period 5,266 4,030New bank loans (10,741) - ----------- ----------Change in net funds (5,475) 4,030 Net funds at 1 November 2005 5,723 1,693 ---------- ----------Net funds at 31 October 2006 248 5,723 =========== ========= Analysis of changes in net funds At On Cash At 1 Acquisitions flows 31 Nov 2005 Oct 2006 £000's £000's £000's £000'sNet cash:Cash in hand and at bank 5,753 3,396 1,840 10,989Bank overdraft (30) (398) 428 -Bank loan - - (10,741) (10,741) --------- --------- --------- -----------Net funds 5,723 2,998 (8,473) 248 ========= ========= ========= =========== 9 Acquisitions Travelzest plc made the following acquisitions during the year: Date Business segmentBest of Morocco Limited 30 November 2005 Tour OperationsPeng Travel Limited 05 May 2006 Tour OperationsThe Montpelier Collection Limited (holding company of 09 June 2006 Travel AgencyFair's Fare Limited)4358736 Canada Inc. (trading as iTravel2000.com) 13 October 2006 Travel Agency These acquisitions have been dealt with using the acquisition method ofaccounting. The post acquisition results of the companies are as follows: Best of Peng Fair's iTravel Morocco Travel Fare 2000.com Total £000's £000's £000's £000's £000's Total transaction value 2,222 1,727 7,222 6,765 17,936 ========== ========= ========== ========= ==========Turnover 2,222 1,669 953 531 5,375Cost of sales (1,571) (1,347) - (1) (2,919) ---------- --------- ---------- --------- ----------Gross profit 651 322 953 530 2,456Administrative expenses (334) (145) (537) (238) (1,254) ---------- --------- ---------- --------- ----------Operating profit (before amortisation) 317 177 416 292 1,202 ========== ========== ========== ======== ========= The fair values in respect of these acquisitions are summarised as follows: Best of Peng Fair's iTravel Morocco Travel Fare 2000.com Total £000's £000's £000's £000's £000'sNet assets acquired:Tangible fixed assets 11 - 11 1,302 1,324Stock 3 - - - 3Debtors 118 17 584 1,657 2,376Cash at bank and in hand 1,723 1,420 253 (398) 2,998Creditors and provisions (894) (595) (965) (1,668) (4,122) ---------- --------- ---------- --------- ----------Fair value 961 842 (117) 893 2,579 Goodwill 1,923 1,088 6,094 24,518 33,623 ---------- --------- ---------- --------- ---------- 2,884 1,930 5,977 25,411 36,202 ========== ========= ========== ========== ========== Satisfied by:Cash 2,669 620 1,250 9,260 13,799Shares - 412 700 - 1,112Exchangeable shares - - - 10,003 10,003Loan notes - - 2,000 - 2,000Deferred consideration - 741 1,750 4,506 6,997Acquisition Costs 215 157 277 1,642 2,291 ---------- --------- ---------- --------- ---------- 2,884 1,930 5,977 25,411 36,202 ========== ========== ========= ========== ========== The fair values of the net assets acquired in respect of Peng Travel Limited andiTravel2000.com are provisional. The deferred consideration in respect of the Peng Travel Limited acquisition ispayable on agreement of the calculation of the fair value of net assets onacquisition. The contingent deferred consideration in respect of the Fair's Fare acquisitionis payable based on the results of Fair's Fare Limited for the years ended 31December 2006 and 31 December 2007 and due for payment on agreement of thecalculation of the results. Based on management expectations of future resultsan amount of £1,750,000 has been provided. The maximum level of contingentconsideration payable is £3,500,000 and the minimum is £0. The consideration ispayable in ordinary shares. The contingent deferred consideration in respect of the iTravel2000.comacquisition is payable based on the results of iTravel2000.com for the yearended 31 October 2007 and due for payment on agreement of the calculation of theresults. The maximum level of contingent consideration payable is £4,506,000and the minimum is £0. The consideration is payable 50% in cash, 50% inexchangeable shares. In addition an amount may become due based on finalconfirmation of the net asset values on acquisition, as at the date of thisreport this has not yet been finalised, the directors expect an amount ofapproximately £300,000 will become payable. There would be no additionalconsideration payable if the vendors chose not to exchange the exchangeableshares. None of the amounts of deferred consideration have been discounted. Holiday Express Group Shares to the value of £433,000 were issued and cash of £640,000 was paid inpart settlement of the contingent deferred consideration on the acquisition ofthe Holiday Express Group. iTravel2000.com Accounting Policy Adjustments The following adjustments were made to the book value of the assets ofiTravel2000.com: Book value GAAP Adjustments Fair value Fair value adjustments (provisional)Net assets acquired £000's £000's £000's £000's Intangible fixed assets 54 - (54)Tangible fixed assets 1,302 - - 1,302Debtors 5,350 (3,693) - 1,657Cash at bank and in hand (398) - (398)Creditors and provisions (5,150) 3,482 - (1,668) -------------- -------------- ------------ -------------- 1,158 (211) (54) 893 Goodwill 24,518 ------------- 25,411 ============ iTravel2000.com accounts for turnover when the customer places an unconditionalorder, the GAAP adjustment adjusts to the Group policy of recognition on receiptfrom the customer of the final balance. Deferred consideration outstanding £000's At 1 November 2005 2,262Settled - cash (640)Settled - shares (433)Acquisitions in year 6,997Fair value adjustment (1,189)Exchange adjustment (72) ---------- 6,925 ========== Due within one year 741Due after more than one year 6,184 ---------- 6,925 =========== The profit/(loss) after taxation of the companies acquired for the latestfinancial period to the date of the acquisition were as follows: Best of Peng Fair's Morocco Travel Fare iTravel2000 01 Aug 05 to 30 01 Jan 05 to 01 Jan 06 to 01 Sept 05 to Nov 05 05 May 06 31 May 06 13 Oct 06 £000's £000's £000's £000's Total transaction value 598 499 6,841 98,792 ======== ======= ======== =========Turnover 598 457 1,025 9,531Cost of sales (436) (368) - (144) -------- ------- -------- ---------Gross profit 162 89 1,025 9,387Administrative expenses (194) (103) (670) (7,758) -------- ------- -------- ---------Operating (loss)/profit (32) (14) 355 1,629Interest receivable (net) 19 24 - (143) -------- ------- -------- ---------(Loss)/profit before taxation ((13) 10 355 1,486Tax on (loss)/profit on ordinary (9) (21) (52) (652)activities -------- ------- -------- ---------(Loss)/profit after taxation (22) (11) 303 834 ======== ======= ======== ========= The profit after taxation of the companies acquired for the full financialperiod prior to the period of the acquisition were as follows: Best of Peng Fair's Morocco Travel Fare iTravel2000 01 Aug 05 to 01 Jan 05 to 01 Jan 05 to 01 Oct 04 to 31 Jul 05 31 Dec 05 31 Dec 05 30 Sept 05 £000's £000's £000's £000's Total transaction value 2,442 2,585 17,392 81,208 ========== ======== ========== ==========Turnover 2,442 2,585 2,063 8,980Cost of sales (1,703) (2,095) - - ---------- -------- ---------- ----------Gross profit 739 490 2,063 8,980Administrative expenses (611) (256) (3,238) (7,609) ---------- -------- ---------- ----------Operating profit /(loss) 128 234 (1,175) 1,371Interest receivable (net) 65 56 (15) (156) ---------- -------- ---------- ----------Profit /(loss) before taxation 193 290 (1,190) 1,215Tax on profit /(loss) on ordinary (29) (61) 79 (579)activities ---------- -------- ---------- ----------Profit/(loss) after taxation 164 229 (1,111) 636 ========== ========== =========== ========= 10 Post balance sheet events On 10 November 2006, the Company subscribed to the entire share capital ofTapestry Travel Limited of £255,000. On 21 December 2006 the Company acquired the share capital of Wow House Limitedfor an initial payment of £95,000. In addition the vendor will be eligible foran earnout payable in shares in Travelzest plc. On 29 December 2006, at the request of the holder, the Company redeemed £523,000of loan notes in advance of their maturity date of 31 May 2007. 11 Publication of non statutory accounts The financial information set out in this preliminary announcement does notconstitute the Group's statutory accounts for the years ended 31 October 2006 or2005. The financial information for the year ended 31 October 2005 is derivedfrom the statutory accounts for that year which have been delivered to theRegistrar of Companies. The auditors reported on those accounts; their reportwas unqualified and did not contain a statement under s.237(2) or (3) CompaniesAct 1985. The statutory accounts for the year ended 31 October 2006 will befinalised on the basis of the financial information presented by the directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
TVZ.L