Preliminary results for the year ended 31 October

24 February 2014

All Leisure group plc

Preliminary results for the year ended 31 October 2013

Financial Highlights

· Full year benefit of the acquisition of the Page & Moy Travel Group has contributed to the additional £10m of tour operating revenue generated in the year

· Underlying operating profit[1] before separately disclosed items and derivatives of £0.8 million (2012: £0.9 million)

· Full year pre-tax loss of £13.6 million (2012: £0.8 million profit). This result reflects a loss on derivative contracts of £4.3 million (2012: £1.7 million gain), and also includes losses of £9.9 million (2012: 1.7 million) in relation to one off, mostly non-cash items

· Net decrease in cash and cash equivalents of £9.4 million (2012: net increase of £10.0m)

· Total current bank and cash position of £14.3 million (2012: £23.8 million) as at the balance sheet date

· Business backed by net assets of £19.2 million (2012: £31.8 million)

· Tour operating division continues to perform strongly, generating underlying operating profits of £4.1 million (2012: £9.1 million) in its first full year within the Group, which includes seasonal winter losses for the first time

· Retirement benefit obligations reduced to £2.1 million (2012: £3.8 million)

Operational Highlights

· Successful integration of the cruise and tour operating businesses within one owned freehold head office location in Market Harborough

· Appointment of new members to the senior management team

· Introduction of mv Voyager to the Voyages of Discovery brand

· Continued operational excellence as indicated by on-board customer surveys revealing that over 9 out of 10 passengers would travel with All Leisure brands again

· Deployment of mv Discovery in a joint arrangement with Cruise & Maritime Voyages Ltd

· Discover Egypt remaining profitable despite the ongoing political issues

Strategy

· Consistent strategy: to achieve growth by exploiting the increasing demand for destination-led holidays and by providing an increasing choice of other niche holiday products into the over-55 English speaking market

Commenting on the results the Chairman Roger Allard said

"During the year we have established a new and very experienced management team to run the business. I believe that we are well positioned to address the challenges presented by the current economic climate and geo-political events. The acquisition of the Page & Moy Travel Group has provided significant cross selling opportunities to the respective customer bases and will continue to do so. The successful integration of this business into the Group has enabled us to realise significant synergies and efficiencies enabling us to create a much stronger business capable of delivering sustained growth."

For further information:

All Leisure group plc

Chairman's Statement

Despite the early signs of general consumption-led economic recovery in the UK, economic conditions remained tough throughout the trading period for the Group's customers given the low real returns on savings. There have been a number of other operational headwinds including continued geo-political uncertainty throughout the world which have impacted to various degrees on our North American, African and Middle Eastern products, particularly in the key market of Egypt. During 2012/13 trading was also adversely impacted by further technical problems experienced on mv Voyager. This affected three cruises during her important summer cruise programme. On the positive side, the management team successfully integrated the Group's core businesses into Market Harborough following the closure of the former Head Office in Burgess Hill and the Swan Hellenic office in Southampton. Finally, despite the issues above, the underlying operating performance of the Group's core businesses has remained positive.

Results

Group revenue for the year increased from £127.4m to £142.1m, an increase of 11.5% overall. This reflected the full year impact of the acquisition of Page & Moy Travel Group on 15 May 2012 leading to a 15% increase in Tour Operating revenue. During the year, revenue from the Cruise division increased by 7.8% due in part to the year round operation of mv Minerva in 2012/13 following a substantial upgrade in Winter 2011/12. 

Overall the Group reported a loss before tax of £13.6m (2012 profit before tax £0.8m). The underlying operating profit of the Group before separately disclosed items and derivative contracts was £0.8m (2012: £0.9m). This performance included the negative impact of £1.0m lost revenue on the cancelled and curtailed cruises referred to above. The overall Group performance was severely impacted by the non-cash negative impact of revaluing ongoing derivative contracts which resulted in a loss of £4.3m (2012 profit of £1.7m). It was also necessary to include under separately disclosed items a number of material one off charges in the year's results. These included the cost of restructuring the Group (£1.8m), plus a further £0.3m in respect of the write off of software, and disposal of the former freehold head office in Burgess Hill. We have also written down the value of the loss-making mv Discovery by £6.7m (non-cash charge), reflecting a recent third party valuation of the vessel. The Board subsequently took the decision to market the ship for sale at the end of the 2014 season.

The Cruise business reported an underlying operating loss of £1.9m (2012: loss of £6.9m) reflecting the impact of £1.0m of lost revenue on cancelled cruises. This was offset by the continued strong performance of the Tour Operator business that earned underlying profits of £4.1m (2012: £9.1m) in the year. The decrease in performance resulted from the inclusion of seasonal winter losses from Page & Moy Travel Group for the first full year.

Dividend Policy

As explained in last year's results statements, the Board is proposing not to pay dividends for the foreseeable future, as it will be concentrating the Group's cash resources on maximising profits and shareholder value in the medium to long term. The Board remains confident that shareholders will see a significant improvement in returns once the cost savings and synergy benefits that have been achieved are not hampered by the ongoing adverse economic, commodity and exchange rate environments.

Strategy

The Group's strategy continues to be one of achieving growth through the provision of an increasing choice of niche holidays products into the UK over-55's market. Following the acquisition of Page and Moy Travel Group on 15 May 2012 the cruise and tour operating businesses have been successfully integrated delivering a significant improvement in operating efficiency of the Group. Significant improvements in underlying performance through improved yield and reduced costs have been delivered. At the same time, the Board is also committed to reducing the levels of committed risk within the Group.

Corporate Governance

As an AIM-traded entity, the Group is not required to comply with the requirements of the UK Corporate Governance Code. However, the Group seeks to apply aspects of the Code that the Board feels are appropriate to a group of this size and aims to improve where possible. The Board reviews Corporate Governance Policy in light of changes and implications to the Group. Please refer to the Group's Corporate Governance Statement in the Annual Report for further details.

Senior Management Changes

As a result of the acquisition of Page & Moy Travel Group, there were changes to the senior management team to reflect the Group's new structure. During the year, Group Board Directors Rob Bryant and Neil Morris left the Group. Director of Fleet Operations; Stuart Horne, Director of Group Purchasing David Bryson, Group HR Director Julie Morrison and Chief Operating Officer Hebridean Island Cruises Ken Charleson were all appointed to the Board of All Leisure Holidays Limited, replacing Board members Patrick Ryan, Alan Murray, Mr Gilbert Rutter, Nigel Cressey and Jos Dewing who all left the Group. I would like to take this opportunity of thanking them for their service.

Operational Review and Plans for 2014

The outlook for the industry in general over the next 12 months remains challenging and we are actively managing the impact on trading by adjusting committed capacity in the cruising division. For the "Voyages of Discovery" and "Swan Hellenic" brands, we have adopted a strategy of focusing on earlier sales in order to minimise discounting and improve load factor. This strategy has resulted in the average selling price being slightly lower than the same time last year, although total sales and revenues are greater. In contrast, the "Hebridean Island Cruises" brand which has limited capacity, has seen both increased sales and prices in comparison to last year. As per my trading update of 13 February 2014, I am delighted with the success of the integration of our Tour Operating and Cruise businesses. This project has already realised a number of Group-wide cost savings and operational efficiencies. Synergy benefits in excess of £1m for 2012/13 have already been delivered and further benefits of these synergies are expected in 2013/14 and beyond.

Cruising Division

Swan Hellenic is operating mv Minerva in South America this winter. A significant upgrade during the winter period 2011/12, which included, adding 32 balconies to cabins, has benefited our yield on these itineraries.

In February 2013, mv Discovery left the Voyages of Discovery brand and entered a Joint Venture, between All Leisure Holidays and Cruise & Maritime Voyages. A similar arrangement is in place for 257 days this financial year. The Group has decided to dispose of the loss-making mv Discovery at the end of this financial year, upon completion of the joint venture. 

mv Voyager entered service for the Voyages of Discovery brand in December 2012 and is currently cruising the Far East. The unfortunate failure of two generators necessitated the curtailment of a UK cruise in May 2013 and the two subsequent cruises were also cancelled to enable the necessary repairs. The repairs were completed in time for the ship to enter into a 70 day charter agreement with Allways of Belgium. A similar arrangement with Allways is in place for 2014 and 2015.

mv Hebridean Princess has recently completed her annual dry dock and sea trials prior to re-entering service next week.

Tour Operating

In their first full year of ownership, the 'Travelsphere' and 'Just You' brands have continued to perform well. Reported profits have reduced due to the inclusion, for the first time, of the usual seasonal winter losses. However, their contribution to the Group's financial performance in 2013 exceeded budget expectations.

The on-going political situation in Egypt continues to have an impact on 'Discover Egypt'. The business remained profitable in 2012/13 despite the impact of travel embargos imposed by the Foreign & Commonwealth Office in July 2013. This is testimony to the low risk, no commitment operating model used by the business.

Outlook

During the year we have established a new and very experienced management team to run the business. I believe that we are well positioned to address the challenges presented by the current economic climate and geo-political events. The acquisition of the Page & Moy Travel Group has provided significant cross selling opportunities to the respective customer bases and will continue to do so. The successful integration of this business into the Group has enabled us to realise significant synergies and efficiencies enabling us to create a much stronger business capable of delivering sustained growth.

Given the Group's current forward visibility of trading, combined with the benefits of capacity management and the cost reduction measures that have been implemented, the Directors have increased confidence for the future of the enlarged business.

My sincere thanks go to all staff across the Group, who remain committed in these challenging conditions.

R J Allard

Chairman

All Leisure group plc

Chief Executive's Report

Operating Review

The disappointing headline results of the Group, largely resulting from a series of exceptional events, should not detract from a year of great accomplishment for the Group. Underlying trade improved significantly in the year with the tour operation acquisition continuing to perform strongly and the benefits of capacity reduction in the cruise business having an immediate impact. In keeping with the strategy of cruise capacity reduction the Board has taken the decision that the loss-making mv Discovery will be disposed of at the end of this summer. 

2012/13 has also been a very successful year of integration and synergising delivery for the Group. Our plans to streamline operations and amalgamate our knowledge base led to the closure of our Burgess Hill office in May followed by the Southampton office in December - ahead of schedule. All expertise has now been centralised at our Head Office in Market Harborough. The integration exercise was exceedingly well planned and executed and has delivered even greater than expected synergies to the Group. I am delighted with the outcome.

Tour Operating

Travelsphere

After extensive customer research helped to re-shape the brand, Travelsphere was re-launched in September 2012. It is now firmly re-established as a 3/4-star brand offering value for money, fully escorted holidays for couples in the more mature market. It also offered a limited chartered river-cruise programme in 2013.

The brand operates a low-risk business model and has no forward financial commitment for hotel costs, transportation costs, or aviation capacity for Summer 2014. It is well known for its knowledgeable Tour Managers, experts and local guides, and enjoys exceptional customer loyalty. All of this was tested in October 2013 when the US Government closed all federal and national buildings for a period of 16 days. A combination of resourceful Tour Managers and a superb crisis team meant that only three Travelsphere tours had to be curtailed or cancelled and customer feedback was very positive given the circumstances.

This year saw the launch of the 'Relax and Discover' range offering a combination of both relaxation and exploration. Additionally a number of new partnership products have been developed with companies such as the Daily Mail. A significant highlight over the past year has been with hotel quality. Travelsphere CSQ scores for "Hotel Overall" has increased by two percentage points to 74% in 2013 demonstrating a substantial shift upwards in the quality of our hotels.

Travelsphere is currently trading in line with expectations for 2013/14.

Just You

Just You is a tour operator historically specialising in fully escorted holidays for mature passengers travelling on their own. In 2013 we undertook a comprehensive research & re-branding initiative leading to a re-launch in September. A new, contemporary look was designed along with the key message that Just You is not just for single people. It is for individuals who have a passion for travel and a desire to fulfil their travel dreams.

The product range is also being expanded following the research. In addition to the worldwide fly-tour programme, European tours by rail and all-inclusive holidays there was a lot of evidence to suggest that City holidays were the main thing missing from our brochure. We developed 11 new holidays from York to New York and early signs are promising. New York, perhaps unsurprisingly, is proving to be an early favourite. 

All holidays are designed to recognise the needs of customers travelling on their own and each holiday includes sole occupancy rooms at no single supplement, welcome and farewell drinks, a number of meals and some excursions. Just You operates a low-risk model and has no forward financial commitment for hotel costs, transportation costs, or aviation capacity for Summer 2014.

Just You is currently trading well for 2013/14.

Discover Egypt

Despite good early season trading figures, from July last year Discover Egypt was adversely affected by political unrest in principal destinations. During the extended duration of the travel restrictions, the lack of ground and aviation commitment enabled us to significantly reduce the cost base of the business.

Since the year end, travel restrictions have been relaxed and the business has been able to recommence its tour programme to Egypt.

Cruise

Voyages of Discovery

In 12/13, the brand offered niche year-round destination led cruise on board mv Discovery. During Winter 12/13 this ship was taken out of service and after a period of technical upgrade and refit was chartered to Cruise and Maritime Voyages who operated the vessel in a joint venture with the Group for 242 days. A similar arrangement for 257 days is planned in 2014, after which the joint venture will cease.

Following a £1.7 million hotel refurbishment, delivered within budget and on time, mv Voyager entered service for Voyages of Discovery as its flagship in December 2012. The brand continues to offer niche, year-round, destination-led cruises on a smaller but more modern vessel (gross tonnage of 15,271 tonnes, 270 cabins). The ship has been well received by the Voyages of Discovery customers in her first year of operation.

As part of our reduction in committed capacity we also began a four-year rolling short-term charter of mv Voyager to Allways with a very successful eighty-day, six-cruise summer season in 2013. A similar programme will operate in 2014.

Despite the clear success enjoyed by mv Voyager in her first year of operation the overall financial picture has been distorted by two consecutive incidents in May 2013 which led to the cancellation of a number of cruises and the repatriation of passengers on board. Following a lubrication oil inefficiency, both of the ships' main generators suffered overheating problems on the approach to Killybegs in Ireland. Further investigations revealed that a full re-build of the main generators was required so the cruise was curtailed and the guests transported home. A further problem was identified with the stern seal which could only be repaired in a Dry-dock. Emergency plans were put in place and the Dry-dock in Bremerhaven, Germany, was contracted to take the vessel. Voyager returned to service just in time for the Allways charter. These incidents cost the business £1.6 million; £0.6m as one off exceptional costs and £1m as the resultant loss of margin from the cruises that did not operate.

Trading performance for 2013/14 is encouraging with 84% of Winter sales having been achieved before the commencement of the season.

Swan Hellenic

 Swan Hellenic also offers niche year-round, destination-led cruises on a leased vessel mv Minerva (gross tonnage of 12,449 tonnes). A leader in small ship discovery cruising with the focus on history and culture, Swan Hellenic include a tailor-made shore excursion at every port on each cruise.The company also offers a limited summer programme of destination-led river cruises on Europe's major rivers on board river cruisers chartered from A-ROSA.

In 2012/13 the ship operated for 365 nights; an increase of 99 nights over the previous year and revenue increased by over £7.5m. Trading for next year is also encouraging; with over 90% of Winter sales having been achieved before the commencement of the season.

Hebridean Island Cruises

Hebridean Island Cruises operates the five star cruise vessel Hebridean Princess along with limited programme of European River cruises.

Hebridean Princess (gross tonnage of 2,112 tonnes) carries a maximum of 50 guests and sails from early March until mid-November. She operates mainly around the west coast of Scotland, the Western Isles and includes visits to Northern Ireland, the Isle of Man and the Northern Isles of Orkney and Shetland.

Hebridean Princess continues to operate successfully and saw a significant increase in year on year revenue between 2011/12 and 2012/13. This trend is expected to continue in 2013/14 driven by an increased daily rate.

The vessel has recently and successfully completed its annual winter dry dock and maintenance programme including undergoing its statutory 5 year survey and will return to service on the 1st of March.

During the 2014 season the vessel will operate within its normal cruising grounds as well as returning to Norway for the first time in five years where she will operate three separate cruise itineraries from and to Bergen during August.

Following the introduction of a successful European river cruising programme during 2012 this programme was repeated during the 2013 season. Hebridean Island Cruises will continue with its European river cruise programme again in 2014.

Operations

The delivery of services on board mv Voyager, mv Minerva and mv Discovery is mainly outsourced. This is consistent with the Board's policy. It is however strategically, technically and commercially controlled by the senior management of the Company in the UK. There are two main suppliers for services on board the vessels, V Ships and Sea Chefs. We use V Ships to employ the deck and engine crew, who are responsible for the ships' maintenance, mechanical operations, and health and safety. We use Sea Chefs to employ the hotel, catering and spa staff.

Outlook

Geo-political events and the wider economic outlook look likely to remain uncertain but the actions and initiatives already taken by the Group leave us in a much stronger position to combat these challenges.

The focus within the Tour Operating business is to introduce new product and grow both passenger numbers and profitability. A number of initiatives have already been launched.

For Travelsphere we have added some new pioneering tours into the 2014 programme. Kashmir, El Salvador, Lithuania, United Arab Emirates, Nova Scotia and Snowdonia all feature in the 2014 programme.

Our focus for Just You has been around creating a brand new range of City holidays. We did extensive research with customers and potential customers as part of the Just You rebrand. In January we launched 2 new Explore tours, and again we have seen a positive reaction to these holidays and there will be more to come later in the year.

Looking ahead, our big volume areas, Italy, North America & Vietnam, are all performing really well for us for 2014 across both the Travelsphere and Just You brands.

The Cruise strategy remains one of managing committed capacity. The joint arrangement with Cruise & Maritime Voyages and our charter arrangement with Allways will continue in 2014. Within our own brands, we continue to offer a full and varied programme of destination led cruises. The demand for this product remains high and our trading performance relative to previous years is strong.

The above factors together with the undoubted success of our integration activities in 2013 make us confident that we will see a significant improvement in financial performance in 2014 and beyond.

I Smith

Chief Executive

All Leisure group plc

Finance Director's Report

Financial Performance

Group revenue for the year increased to £142.1m, an increase of £14.8m on the previous year. The full year benefit of the acquisition of the Page & Moy Travel Group contributed to the additional £10.0m of Tour Operating revenue generated by the Group. During the year, revenue from cruising increased by 7.8% reflecting the full year operation of mv Minerva. The impact of the cancelled cruises referred to in the Chairman's statement were responsible for £1.0m of lost revenue.

The operating profit of the Group before separately disclosed items was £0.8m (2012: £0.9m). Overall the Group has delivered a loss before tax for the financial year of £13.6m compared to a profit before tax of £0.8m for the year ended 31 October 2012. This result reflects £4.3m of losses on derivative contracts (2012: profit of £1.7m). These are non cash items. This result also includes £9.9m (2012: £1.7m) of one off and other separately disclosed items. These items have been categorised in the Group's income statement and in note 7 to the financial statements and included an impairment of mv Discovery of £6.7m, restructuring costs of £1.8m and costs relating to cancelled cruises of £0.6m

Notwithstanding these headline results, the Cruise business showed significant year on year improvement in underlying performance from £6.9m loss in 2012 to £1.9m in 2013 inclusive of £1m of lost revenue on cancelled cruises. Underlying Tour Operating profit reduced from £9.1m in 2012 to £4.1m in 2013 although this was attributable to the inclusion of Page and Moy Travel Group winter losses for the first time.

Currency and Fuel Management

In order to maintain an active currency management strategy the Group employs a variety of derivative financial instruments of varying complexity. These help the Group to achieve its budgeted exchange rates which are often higher than market rates, albeit with risks that often differ from those of a vanilla forward contract. The majority of the Group's currency requirements for FY2013 were covered by derivative contracts and in addition the Group has similar arrangements in place to cover the majority of its requirements for the year ahead. Given that most of the derivatives used by the Group do not qualify for hedge accounting, the Group has chosen to value all of its derivatives at fair value through the profit and loss.

As at the balance sheet date of 31 October 2013, the net mark-to-market valuation of these derivative positions was a liability of £4.9m, compared with £0.6m as at 31 October 2012. Such figures are significant, particularly within the context of the Group's current level of profitability, however it is important to put these accounting definitions into a commercial context.

Firstly the value of our foreign exchange and fuel hedges (which are non-cash accounting items) vary significantly over time. Secondly, in order to deliver currency to the Group at rates at or above the budgeted rate used to price our product, the Group generally holds derivatives to maturity irrespective of fluctuations in their mark to market valuation. Thirdly, as predominantly over-the-counter instruments, the Group has extensive experience of further managing its currency purchases by revising contract terms as market conditions change. For these reasons the Board is confident that the current hedging strategy is correct despite any costs that may from time to time be reflected in the Group income statement, and any potential obligation to buy foreign currency in quantities that might exceed the Group's short term requirements.

Capital Expenditure

The Group has invested heavily in its fleet. Over the winter, mv Hebridean Princess underwent an annual routine dry dock, mv Voyager underwent a further technical upgrade and hotel refurbishment before entering the Voyages of Discovery brand and mv Discovery underwent a technical upgrade and refit before being chartered to Cruise & Maritime Voyages.

In total, capital expenditure for the year ended 31 October 2013 totaled £8.3m, demonstrating management's ongoing commitment to investing in the Group's product.

Looking forward, mv Hebridean Princess will undergo a further annual routine dry dock. No other dry dock activity is scheduled for the 2013/14 financial year.

Cash Flows

Net cash flows from operating activities have decreased by £3.7m compared to 2012 resulting in a net cash outflow of £9.4m for the year ended 31 October 2013. 

Total cash and balances at bank at the year-end amounted to £14.3m (2012: £23.8m), of which £10.7m (2012: £18.2m) is classified as cash and cash equivalents and £3.6m (2012: £5.6m) classified as restricted cash. The Group has immediate access to all of these balances, other than the amounts reported as restricted cash. Customer deposits at 31 October 2013 amounted to £31.3m (2012: £30.2m). At 31 October 2013 the Group had borrowings of £5.2m (2012: £5.8m).

Of significance to the cash flow was capital expenditure which included additions paid for in the year of £8.3m.

Retirement Benefit Schemes

The Group operates a defined benefit scheme, the Page & Moy Limited Retirement Benefits Scheme. At 31 October 2012 the deficit in the scheme was assessed at £3.8m. As at 31 October 2013 the deficit had reduced significantly to £2.1m. This was, in part, reflective of contributions of £0.4m made by the Group during the period, as agreed in the Recovery Plan.

Going Concern

The Group ended the year with net assets of £19.2m (2012: £31.8m), net current liabilities of £36.8m (2012: £28.4m) and total cash of £14.3m (2012: £23.8m). In addition, the Group had borrowings of £5.2m (2012: £5.8m).

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out above and in the statements of the Chairman and Chief Executive, detailing the challenging trading environment the Group faces at present.

In view of the trading environment, coupled with the reduction in liquid resources available to the Group, the Directors have prepared a forecast for the business for 24 months from the balance sheet date to 31 October 2015 taking into account key assumptions about future trading performance and their plans for the Group including the previously mentioned fleet reduction. This forecast also includes variances to take into account events that may not materialise in line with expectations. The results show that the Group will continue to have sufficient cash resources over this period.

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

C J Gadsby

Group Finance Director

Key Performance Indicators

The following table provides current and historical key performance indicators ('KPI's) employed by the Group:

Other operating data

The following table provides the current and historical figures for the principal operating KPIs employed by the Group:

Notes:

(i) Calculated as the total passengers carried multiplied by the total number of revenue sailing days.

(ii) Excludes unrealised gains and losses on fuel hedges and fuel consumption during Allways charter.

All Leisure group plc

Consolidated Income Statement

For the year ended 31 October 2013

All results are derived from continuing operations

All results are attributable to equity holders of the parent Company.

All Leisure group plc

Consolidated Statement of Comprehensive Income

For the year ended 31 October 2013

All Leisure group plc

Consolidated Statement of Changes in Equity

At 31 October 2013

Revaluation reserve: At 31 October 2013 the group reclassified Discovery Mews, Copthorne, Surrey as held for sale, and revalued the property to its fair value of £350,000.

Currency translation reserve: At 31 October 2013 one of the Group's subsidiary companies has a US$ functional currency and the translation reserve represents the exchange gains and losses arising on the retranslation of the net assets of this subsidiary entity.

All Leisure group plc

Consolidated Balance Sheet

At 31 October 2013

The financial statements of All Leisure group plc, registered number 01609517, were approved by the Board of directors and authorised for issue on 21 February 2014.

They were signed on its behalf by:

C J Gadsby

Director

All Leisure group plc

Consolidated Cash Flow Statement

For the year ended 31 October 2013

1. Financial information

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 October 2013 or 31 October 2012, but is derived from those accounts. Statutory accounts for the year ended 31 October 2012 have been delivered to the Registrar of Companies and those for the year ended 31 October 2013 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties, financial instruments and defined benefit scheme related employee benefits. The principal accounting policies adopted are set out below. The financial statements have been prepared on a going concern basis. The responsibility statement below has been prepared in connection with the Company's full annual report for the year ended 31 October 2013. Certain parts thereof are not included within this announcement. We confirm to the best of our knowledge:

- The financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and

- The management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties they face.

The responsibility statement was approved by the board of directors on 24 February 2014 and is signed on its behalf by:

Roger Allard - Executive Chairman

Chris Gadsby - Group Finance Director

2. Significant accounting policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below.

The financial statements have been prepared on a going concern basis as discussed in the Finance Director's Report.

The principal accounting policies adopted are set out below. These policies have been applied consistently unless otherwise stated.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 October each year. Control is achieved when the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

All subsidiaries are 100% owned and there are no non-controlling interests in the Group.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

2. Significant accounting policies (continued)

Basis of consolidation (continued)

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the IFRS policies used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Going concern

The directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the Finance Director's report.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire. Acquisition-related costs are recognised in profit or loss as incurred.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except that deferred tax assets and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee benefits respectively.

 Intangible Assets - Goodwill

Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer's previously held equity over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

If, after reassessment, the Group's interest in the net fair value of the acquiree's net assets exceeds the sum of the consideration transferred, the excess is recognised immediately in profit or loss as a bargain purchase gain.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating unit's to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 Intangible assets - Other

Intangible assets other than goodwill with a finite useful life are carried at cost less amortisation and any impairment losses. Intangible assets with indefinite useful lives are not amortised. For all other intangibles, amortisation is charged on a straight-line basis over the asset's useful life, as follows:

2. Significant accounting policies (continued)

Revenue recognition

Revenue comprises sales to third parties (excluding VAT and similar sales, port and other taxes).

Cruise revenues and cruise charter revenues, together with revenues from onboard and other activities, which include transportation are recognised in income for each day of the cruise as it progresses. Shore excursion revenue is recognised on the date of the excursion.

Tour operating revenues, including excursions, insurance revenue and other services supplied to customers in the ordinary course of business, are taken to the income statement on holiday departure.

Client monies received at the balance sheet date relating to holidays commencing after the year end are deferred and included within trade and other payables.

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Other revenue and associated expenses are taken to the income statement as earned or incurred.

Revenue and expenses exclude intra-group transactions.

 Foreign exchange

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and recognised in the Group's foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Property, ships, plant and equipment

Land and buildings held for administrative purposes are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. The freehold property owned by All Leisure Holidays Ltd was revalued in October 2013 and the freehold property owned by Page & Moy Travel Group Air Holidays Ltd was fair valued at entry into the Group on 15 May 2012.

2. Significant accounting policies (continued)

Property, ships, plant and equipment (continued)

Any revaluation increase arising on the revaluation of such land and buildings is credited to the properties' revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties' revaluation reserve relating to a previous revaluation of that asset.

Depreciation on revalued buildings is charged to income. On the subsequent sale of a revalued property, the attributable revaluation surplus remaining in the properties' revaluation reserve is transferred directly to retained earnings.

Freehold land is not depreciated.

Property, ships, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment in value.

Depreciation is provided on all property, dry docks, ship improvements and plant and equipment, other than freehold land, at rates calculated to write off the cost or revalued amount, less estimated residual value of each asset evenly over its expected useful life, as follows:

The carrying values of property, ships, plant and equipment are reviewed at least annually for impairment or if events or changes in circumstances indicate the carrying value may not be recoverable.

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. Further details regarding the residual values of the cruise ships are provided in note 3.

Costs relating to mandatory cruise ship dry docks are capitalised and depreciated over the period up to the next dry dock where appropriate.

An item of property, ships and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, ships and equipment is determined as the difference between sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Investment property

Investment property, which is property held to earn rentals, is stated at deemed cost as the Group elected, under the transitional arrangements available under IFRS 1, to use the previous carrying value under UK GAAP as deemed cost on transition to IFRS. The investment property is depreciated on a straight-line basis at 2% per annum. The land on which it is situated is not depreciated.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the property is derecognised.

Non-current assets held for sale

The Group classifies non-current assets held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. To be classified as held for sale, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such assets, and their sale must be highly probable. Sale is considered to be highly probable when management is committed to a plan to sell the assets and an active programme to locate a buyer and complete the plan has been initiated at a price that is reasonable in relation to their current fair value, and there is an expectation that the sale will be completed

2. Significant accounting policies (continued)

Non-current assets held for sale (continued)

within one year from the date of classification.

Non-current assets classified as held for sale are carried on the Group's balance sheet at the lower of their carrying amount and fair value less costs to sell.

Impairment of tangible and intangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet at fair value when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement', the Group's financial assets are classified into the following specified categories:

· loans and receivables; and

· financial assets 'at fair value through profit or loss' ("FVTPL").

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Currently the Group does not have any financial assets that are classified as 'held to maturity' or 'available-for-sale', as defined by IAS 39.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and other receivables are measured at amortised cost using the effective interest method, if the time value of money is significant, less any provision for impairment. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired. This category of financial asset includes trade receivables.

2. Significant accounting policies (continued)

Financial assets at FVTPL

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. In respect of the Group, financial assets at FVTPL can include the Group's fuel and foreign currency derivatives with their fair value being determined by external valuers using market data (please refer to note 3 for further details).

Bank balances and cash in hand

Restricted cash comprises cash deposits which have restrictions governing their use and are classified as current or non-current dependent on the remaining length of the restriction, which is determined from contractual terms governing the restriction. Cash and cash equivalents comprise cash in hand, cash held in banks accounts with no access restrictions and bank or money market deposits repayable on demand or maturing within three months of inception. If the bank or money market deposits have an original maturity of three months or more these are disclosed as 'interest bearing bank deposits' outside cash and cash equivalents. This reflects the contractual terms of the deposit agreements such that whilst the Group often has immediate access to the bank deposits, the counterparty has the right to restrict interest payments in the event of early withdrawal. Interest income on these balances is recognised using the effective interest method.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been reduced.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, an appropriate portion of the loss previously recognised is reversed.

De-recognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or financial liabilities measured at amortised cost.

Financial liabilities at amortised cost

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. This category of financial liabilities includes trade payables, accruals, deferred income and borrowings.

2. Significant accounting policies (continued)

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. The Group has not designated any financial liabilities as being at FVTPL and accordingly only holds financial instruments in this category that are deemed to be held for trading under the provisions of IAS 39.

With respect to the Group, the financial liabilities that can be classified as financial liabilities that are held for trading are the derivative instruments that are not designated and effective as hedging instruments (see the derivative accounting policy below).

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Derivative financial instruments

The Group's activities expose it primarily to the financial risks of changes in foreign exchange rates and changes in the price of fuel for the ships. Derivative financial instruments are used by the Group to mitigate its exposure to movements in currency exchange rates and movements in the price of fuel.

The majority of the Group's derivatives do not meet the hedge classification criteria of IAS 39. The Group has chosen to measure all its derivatives at fair value through profit and loss (FVTPL), with the movement being disclosed on the face of the income statement.

Derivative financial instruments are measured at fair value as described above.

A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Share capital and share premium account

There is one class of shares. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium account. Incremental external costs directly attributable to the issue of new shares are recorded in equity as a deduction, net of tax, in the share premium account.

Dividends

Dividends are provided for in the period in which they become a binding liability on the Company.

Provisions

A provision is recognised in the balance sheet when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

2. Significant accounting policies (continued)

Inventories

Inventories representing engineering spares, fuels, lubricants and consumables are stated at the lower of cost (being purchase price to the Group) and net realisable value.

Where necessary, provision is made for obsolete and damaged stocks.

Leases

Leases taken by the Group are assessed individually as to whether they are finance leases or operating leases. 

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease rental payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The benefit of any lease incentives is spread over the term of the lease.

All Group leases (which include Bareboat Charter agreements) are classified as operating leases.

Taxation

The tax expense represents the sum of current tax expense and deferred tax expense.

Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes some of the items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Certain of the Group subsidiary companies are subject to taxation under the UK Tonnage Tax regime. Under this regime, a shipping company may elect to have its taxable profits computed by reference to the net tonnage of each of the qualifying ships it operates.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit not the accounting profit. 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities are recognised for taxable temporary differences arising on investment in subsidiaries, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

2. Significant accounting policies (continued)

Share-based payment

In prior periods the Group has issued equity-settled share options to certain employees as part of their total remuneration. The fair values of the share options were calculated at the date of grant, using an appropriate option pricing model. These fair values were charged to profit or loss in full immediately as the options vested on grant. On the basis that both schemes are immaterial to the financial statements, the full disclosure requirements of IFRS 2, 'Share based payment' has not been included.

Retirement benefit costs

The Group operates defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to the income statement in respect of pension costs and other post-retirement benefits is the contributions payable in the year. 

Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

The Group also operates a defined benefit scheme. The pension liabilities recognised on the balance sheet in respect of this scheme represent the difference between the present value of the Group's obligations under the scheme (calculated using the projected unit credit method) and the fair value of the scheme's assets. Actuarial gains or losses are recognised in the period in which they arise within the consolidated statement of changes in equity. The current service cost, representing benefits accruing over the year, is included in the consolidated income statement as an administrative expense. The unwinding of the discount rate on the scheme liabilities and the expected return on scheme assets are presented as investment revenues. Past service costs are recognised immediately in the income statement as administrative expenses.

Operating profit

Operating profit is stated before investment revenues.

Income statement presentation and separately disclosed items

For information purposes management believe it is helpful to disclose certain items separately.

These items are presented within their relevant income statement category, but highlighted through separate disclosure. This is the second year the Group has presented the income statement in this manner and management intend to consistently disclose these items each year.

Items which are included within the category of separately disclosed items include:

· Costs of acquisitions

· Asset impairments

· Other individually material items that are unusual because of their size, nature or incidence but which are considered not to be related specifically to the underlying result.

Material business combination intangible assets were acquired as a result of the acquisition of Page & Moy Travel Group Limited. The amortisation of these intangible assets is significant and the Group's management consider that it should be disclosed separately to enable a full understanding of the Group's results.

3. Critical accounting judgements and key sources of estimates uncertainty

In the application of the Group's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

3. Critical accounting judgements and key sources of estimates uncertainty (continued)

Critical judgements in applying the Group's accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.

Residual value of cruise ships

As in the prior year, the residual value of the Group's cruise ships is measured on the basis of either an operating cruise ship or scrap value at the current projected end of its useful life to the Group. In the cases where it is planned to dispose of the ship as a working vessel, the estimate of the residual value reflects independent specialist advice received by the Company from members of the Institute of Chartered Ship Brokers, relating to the current value of the vessels coupled with the likely disposal value of the ship at the projected end of the useful life to the Group. If it is assumed the ship will be scrapped, the residual value is based on external market data for the scrap value of steel and estimated sales proceeds of any removable assets from the ship. Ship residual values are determined in US

Dollars or Euros and are therefore subject to foreign exchange risk. Residual values are reviewed annually to take account of market conditions.

Acquisition of Page & Moy Travel Group Limited

The acquisition of Page & Moy Travel Group Limited, as disclosed in note 4, was accounted for using the acquisition method based on the fair value of the consideration paid. The assets and liabilities were measured at fair value and the purchase price was allocated to assets and liabilities based on these fair values. Determining the fair values of assets and liabilities acquired involves the use of significant estimates and assumptions, including discount rates, asset lives and recoverability. With regards to assets and liabilities measured at fair value, the value of the freehold property was measured using a qualified surveyor on an open market basis and the valuation of the defined benefit pension liability was prepared by qualified actuaries. With regards to the purchase price allocation and determination of intangible assets, management engaged recognised experts in this field to assist in the process, who also benchmarked key assumptions, such as discount rates and asset lives, against industry peers.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Valuation of derivative financial instruments

The Group has significant derivative assets and liabilities on balance sheet as at 31 October 2012 and 31 October 2013, which are carried at fair value as required by IAS 39, Financial instruments: Recognition and Measurement. The fair value is reported in the income statement and creates volatility in reported results. The Group believes that the derivative market value at the year end is based on appropriate estimates. The Group notes though that the valuation of derivative financial instruments requires significant estimates, primarily:

- The spot rate at the balance sheet;

- The forward rate;

- Time, in terms of remaining contractual term and fixing date(s) contained within it; and

- Market volatility.

3. Critical accounting judgements and key sources of estimates uncertainty (continued)

Dry dock provisions

The bareboat charter agreement for mv Minerva establishes certain minimum return conditions on the vessel at the end of the agreement. To the extent that these are considered unavoidable, the Group records a provision for the best estimate of the expected expenditure to be incurred, with a corresponding asset recorded. The asset is depreciated to the date that the work is planned to be completed. The estimation of the provision requires significant judgment, and has inherent uncertainties relating to the cost of the work to be completed. Further, the liability will be settled principally in Euros and is carried in a US Dollar functional currency entity. Accordingly, the level of the liability at Group level is subject to both fluctuations in value between the US Dollar and Euro exchange rate, and the Euro and £ sterling exchange rate. Due to the significance of the provided amounts, the estimate of the provision and associated foreign exchange fluctuations can create volatility in the Group reported financial position and financial performance, and ultimately in the Group cash flows in the period that the repair and maintenance obligations are discharged.

Retirement benefits

The consolidated financial statements include costs in relation to, and provision for, retirement benefit obligations. The costs and the present value of any related pension assets and liabilities depend on such factors as life expectancy of the members, the salary progression of current employees, the returns that plan assets generate and the discount rate used to calculate the present value of the liabilities. The Group uses previous experience and independent actuarial advice to select the values of critical estimates.

Impairment of Swan Hellenic

The Group has completed a detailed impairment review of the assets in the Swan Hellenic cash generating unit (CGU).

The Swan Hellenic brand is currently used for cruises on the mv Minerva. Following improvements and modernisation of the vessel undertaken during the previous financial year, the lease on this ship has been extended to 2021.

The recoverable amount assumes that from this date cruises under this brand will take place on a replacement vessel. In determining the recoverable amount, the Group has used the following principal inputs:

The Group prepares cash flow forecasts derived from the most recent financial budgets for the next five years and calculates a terminal value for periods thereafter. These assumptions have been revised in the year in light of the current economic environment. Management estimates discount rates using pre-tax rates that reflect current market

assessments of the time value of money and the risks specific to the CGU. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market and the ship on which the brand operates. It is anticipated that sales volumes will increase over the next year as the economic recovery gathers pace and the demand for cruise holidays increases.

Based on this review, which concluded that the value in use is higher than the net book value of the CGU, the Group is satisfied that the assets of Swan Hellenic are not impaired at the balance sheet date. The Directors note that the assumptions made in preparing the impairment review have a significant impact on the recoverable amount of the CGU, and actual events may differ materially from expectation.

3. Critical accounting judgements and key sources of estimates uncertainty (continued)

Impairment of Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the CGU to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value.

The carrying amount of goodwill at 31 October 2013 was £9,517,000 (2012: £9,517,000). There was no impairment of goodwill in the year.

Impairment of ship values

The Group has completed a detailed impairment review of mv Discovery following an independent valuation which indicated that the current market value of the ship was significantly lower than its carrying value.

Based on this review, the Group estimated that the fair value of the asset was £6,700,000 less than its carrying value, and this amount has therefore been recognised as a charge to the income statement.

Provision against a material counterparty

A provision was made in the prior year against a material receivable from a counterparty in respect of which there is an on-going dispute. Management has estimated the amount recoverable, based on the available evidence, and used this to determine the provision required.

Recognition of deferred tax asset relating to carry-forward unused losses

Other than a deferred tax asset arising from deductible temporary differences, the Group has recognised a deferred tax asset relating to unused losses arising from the Page & Moy Travel Group. The quantum of the asset recognised has been calculated based on the extent it is probable that future taxable profit will be available against which they can be utilised in the context of Page & Moy Travel Group's trading performance in recent financial years, which management have determined as budgeted taxable profits one year from the balance sheet date.

4. Acquisition of subsidiary

On 15 May 2012, All Leisure group PLC acquired 100% of the issued share capital of Page & Moy Travel Group Limited ("PMTGL"), on a debt free basis, for a consideration of £3.3m. The acquisition of PMTGL has resulted in the majority of All Leisure's revenues being derived from Tour Operating as opposed to Cruise, which was one of the main reasons for completing the transaction, albeit there are similar customer demographics for both businesses.

Page & Moy Travel Group Limited is a holding company. The principal activity of its subsidiaries is tour operating; offering touring holidays to a wide range of overseas destinations.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below.

4. Acquisition of subsidiary (continued)

The amount indicated above for trade and other receivables represents the fair value of the acquired receivables and is equal to the gross contractual cash flows.

There are no contingent liabilities.

Acquisition related costs (included in administrative expenses) amounted to £0.3m.

The purchase price of each asset component of the acquisition was determined in the prior year and represented a preliminary assessment of their fair value, based on management's best estimates. There have been no changes during the year, and management therefore consider these amounts to be final.

The goodwill of £9,517,000 arising from the acquisition reflects the anticipated benefits of synergies, revenue growth, future market development and the assembled workforce of PMTGL. These benefits are not recognised separately from Goodwill as they do not meet the criteria for identifiable intangible assets. None of the goodwill is expected to be deductible for tax purposes.

The acquired business contributed revenue of £60,867,000 and profit before tax of £8,935,000 to the Group for the period from acquisition to 31 October 2012.

If the acquisition had occurred on 1 November 2011, it would have contributed £93,927,000 to consolidated revenue and £4,644,000 to consolidated profit for the year.

5. Revenue

An analysis of the Group's revenue is as follows:

Ancillary services revenue included within sales of cruise holidays and ancillary services includes all revenue derived directly from the cruise holidays sold, other than the principal cruise. Ancillary services revenue includes excursions revenue, on board revenue such as bar, laundry and other, and insurance income. None of these revenue streams account for more than 10% of the overall revenue and are considered by the Directors to be a component of the overall revenues derived on cruises.

Ancillary service revenue included within sales of escorted tours and ancillary services includes non inclusive tours, visa services and flight upgrades. None of these revenue streams account for more than 10% of the overall revenue and are considered by the Directors to be components of the overall revenues derived on escorted tours.

6. Business and geographical segments

The Group has identified that each of its divisions is an operating segment and that these operating segments meet the criteria to be aggregated into the two reporting segments: Cruising (including the Voyages of Discovery, Swan Hellenic and Hebridean Island Cruises brands) and Tour Operating (including the Travelsphere, Just You and Discover Egypt brands).

Reporting segment revenues and results

The Group is currently organised into two reporting segments as follows:

Cruising: This includes the cruise operating segments. Revenue streams are principally from the UK but also from the USA and rest of the world.

Tour operating: This segment represents the Group's escorted tours operation, providing escorted tour holidays to a wide range of overseas destinations. Revenue streams are from the UK.

The Group holds all its derivative contracts to maturity and for this reason, coupled with being unable to hedge account under IAS 39, the information on these instruments is reported separately to the chief operating decision maker. Furthermore, these movements are not allocated to any one reporting segment in the management accounts. As a consequence the information is presented below with an adjustment that reconciles the operating profit on an IFRS basis, which includes the mark-to-market impact of the Group's open derivative financial instruments.

The following is an analysis of the Group's revenue and results by reportable segments in 2013:

6. Business and geographical segments (continued)

The following is an analysis of the Group's revenue and results by reportable segments in 2012:

Segment assets

The unallocated corporate assets primarily relate to group properties.

6. Business and geographical segments (continued)

Other segment information

Geographical segments

The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services and the location of the Group's non-current assets:

Revenues are attributed to individual countries on the basis of region of booking.

7. Separately disclosed items

During the year the group announced the closure of its offices in Southampton. The onerous lease provision arises as a result of the ongoing lease commitment for the Southampton premises. In the prior year an onerous lease provision arose as a result of losses incurred, or anticipated to be incurred, from the bareboat charter of mv Voyager to a third party.

Restructuring costs of £1,655k have arisen during the year as a result of the relocation of the group's operations in Burgess Hill and Southampton to Market Harborough.

At the year end an impairment review was undertaken in respect of mv Discovery (see note 3 for further details). This revealed a decline in the market value of the ship and an impairment charge of £6,700k has therefore been incurred.

Costs of £563k were incurred due to the cancellation of certain cruises following major mechanical problems on-board mv Voyager.

Costs of £263k were written off during the year in relation to expenditure on software prior to the integration of the businesses.

The group disposed of Lynnem House, Burgess Hill during the year and incurred a loss on disposal of £68k.

The provision against a material counterparty in the prior year arose as a result of an ongoing dispute. Please refer to note 3 for further details.

The impairment of property in the prior year arose as a result of the decrease in the market values of Lynnem House and 54 The Hundred.

Other income in the prior year relates to monies received from insurance claims. Please refer to note 8 for further details.

Acquisition costs of £310,000 arose in the prior year as a result of the acquisition of Page & Moy Travel Group Limited.

Material business combination intangible assets were acquired as a result of the acquisition of Page & Moy Travel Group Limited. The amortisation of these intangible assets is significant and the Group's management consider that it should be separately disclosed to enable a full understanding of the Group's results.

8. Other income

Insurance claims

The insurance claims amount relates to the settlement of insurance claims made in respect of technical matters experienced on ships operated by the Group based on events in previous periods.

Damages awarded

The damages awarded arose from the Company's success against the insurers underwriting the financial failure insurance provided to passengers of Hebridean Island Cruises Limited. The Insurers refused to pay out under the policy because the Company operated identical replacement cruises for passengers at no extra cost. In September 2009, the passengers formally assigned their claims under the policy to the Company and in March 2010, the Company's solicitors issued a claim on behalf of the Company in the Commercial Court ("the Court").

The Court ruled in the Company's favour on all accounts and awarded the Company the full amount claimed. The amount presented above is shown net of insignificant unrecoverable legal costs incurred.

Further details are disclosed in the Group's FY2011 and FY2012 financial statements.

9. Operating loss

10. Tax (credit)/charge

a) Tax (credit)/charge on (loss)/profit

Corporation tax is calculated at 23.4% (2012: 24.8%) of the estimated taxable profit for the year

(b) Factors affecting the tax (credit)/charge for the year

The tax assessed for the year differs from (2012 - differs from) that resulting from applying the standard rate of corporation tax in the UK of 23.4% (2012 - 24.8%). The differences are explained below:

For accounting periods beginning on or after 1 January 2000 a shipping company or group may elect to have its taxable profits computed by reference to the net tonnage of each qualifying ship it operates subject to meeting various conditions. Accordingly, the profits or losses arising from the cruising segment are not subject to taxation under the normal corporation tax regime.

10. Tax (credit)/charge (continued)

In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised in other comprehensive income:

(c) Factors affecting future tax charge

At the balance sheet date, the Finance Act 2013 had been substantively enacted confirming that the main UK corporation tax rate will be 21% from 1 April 2014 and 20% from 1 April 2015. Therefore, at 31 October 2013, deferred tax assets and liabilities have been calculated based on rates of 21% or 20% where the temporary differences are expected to reverse after 1 April 2014 or 1 April 2015 respectively.

11. Dividends

No interim dividend was paid in the year. It was announced on 27 July 2012 that the Group is proposing not to pay dividends for the foreseeable future (please refer to the Chairman's Statement for further details on the Group's dividend policy).

12. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

All results derive from continuing operations and accordingly total earnings per share and earnings per share from continuing operations are the same.

* The group has identified a number of one off, non-recurring items which have been separately disclosed (please see note 7 for further details). These items have been exluded when calculating the underlying (loss)/profit.

13. Notes to the cash flow statement

14. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and other related parties are disclosed below:

Trading transactions

During the year, Group companies entered into the following transactions with related parties who are not members of the Group:

Roger Allard Limited is a company owned and controlled by Mr R J Allard a director of the Company and majority shareholder of the Group and the payments made are for consultancy services.

PB Consultancy services is owned and controlled by Mr P E Buckley the Company Secretary of the Group and the payments are for consultancy, accounting and Company Secretarial services.

On 15 May 2012, All Leisure Group PLC acquired 100% of the issued share capital of Page & Moy Travel Group Limited ("PMTGL"), on a debt free basis, for a consideration of £3.3m. The consideration was funded with a £5.8m loan from a consortium of individual investors, some of whom were related parties. The lenders who meet the definition of related parties, and the amounts loaned to the Group are as follows:

N J Jenkins is a director and shareholder in All Leisure group plc. D A Wiles is a director of All Leisure Holidays Limited, a subsidiary of All Leisure group plc.

14. Related party transactions (continued)

Remuneration of key management personnel

The remuneration of the Directors of the Company and subsidiary company directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. 

15. Principal risks and uncertainties

The Directors continually identify, evaluate and manage material risks and uncertainties faced by the Group which could adversely affect the Group's business, operating results and financial position. The list below details what the Directors consider to be the principal risks and uncertainties and the actions taken, or to be taken, to mitigate potential adverse consequences. This list is not intended to be exhaustive and other risks may emerge over time: