MyTravel destination unknown
It's been a tough year for the travel industry following the post-September 11 slump in tourism and many associated industries have also suffered.
This situation is exasperated when financial irregularities leave you with a large hole in your accounts, which is exactly the problem MyTravel has had to face over the past few weeks.
Its preliminary results, released next week, may make fairly grim reading.
Over the past five months the company has issued three separate profit warnings and has seen its share price collapse.
Last month, the company also revealed it had discovered a hole in its accounts that could lead to its profits being £50m less than previously anticipated. It later revealed accounting revisions, which made up £30m of this potential £50m hole, were unlikely to materialise.
However, these accounts are under preliminary review by the Financial Reporting Review Panel to discover if they comply with the 1985 Companies Act and UK accounting standards. If any irregularities are spotted, a more detailed inquiry could follow and the company could be forced into a restatement.
Whatever does turn up could still be damaging to the company which owns the Airtours, Direct Holidays and EuroSite brands among others.
It has announced that dividends will be scrapped this year and group chief executive Tim Byrne paid the price for the company’s poor performance with his job, while chairman David Crossland has postponed his retirement to stay on an extra 12 months in an attempt to sort out the mess.
The future of the company could be decided over the next few weeks. MyTravel’s credit facility expires in March 2003.
Unless it obtains a new one soon, it may struggle to survive. It is understood that the company has agreed to a new deal with its banks but this is conditional on a review of its finances to establish its short-term cash position and long-term viability.
While most investors are braced for bad news, perhaps the one glimmer of hope is that given the huge negative publicity the company has had to endure, the results may not be as bad as everyone is fearing and could restore some confidence.
But with the share price hovering around the 22p mark, down from a year high of 288p, the company has a long way to go before it can truly get back on its feet again.
