Western & Oriental plc, the specialist luxury travel group, today announces a trading update for the current financial year ahead of entering the close period relating to the 6 month period to 31 March 2009.
Despite the very challenging economic environment the board is pleased with the overall business performance and anticipates that the group will be materially ahead of management expectations for the seasonally weaker first half of the financial year to 30 September 2009.
In the first 6 months departure based sales have been broadly in line with expectations, gross profit margins are significantly ahead of expectations, overall costs are below expectations and interest received, due to the recent dramatic reductions in interest rates, is below expectations. This combination delivers a result materially ahead of management expectations.
All of the London based businesses, with the exception of Rainbow Holidays where economically it makes sense to leave the business in North London, have been integrated into the main offices in Victoria. Additionally, we have rolled out the new reservation and back-office systems to all tour operating businesses and are now starting to reap the benefits of the efficiencies those systems provide.
Within conference and incentive we have consolidated the businesses into a single brand, W&O Events Limited, with a single management structure. Again, this consolidation provides further opportunities for reducing the cost base.
In the full year results announcement for the year to 30 September 2008 we announced that the overall overhead costs of the group had been reduced by some £1.7 million going forward. The cost base is now reaping the benefit of those actions in this financial year. In addition, since the start of the current financial year, we have taken the opportunity to further review the resources required to operate the group.
This has resulted in additional cost reductions in December 2008 and March 2009 totalling approximately £0.9 million in the current financial year and some £2.0 million on a full year basis.
During the first 6 months of the 2009 financial year tour operating customers have booked significantly later than in previous periods. Customers are now booking 3 to 4 months forward compared to 6 months plus previously.
Within the conference and incentive division forward order books are still very robust in the pharmaceutical sector, which represents over 50 per cent of total sales, less in other sectors.
During the first 6 months the forward order book has reduced from £25.7 million at 30 September 2008 by approximately £6.4 million to £19.3 million.
Despite having taken appropriate action early to reduce costs management will continue to identify further areas for cost reduction and gross profit margin improvements.
While the board remains cautious regarding the economy and consumer spending patterns, the group is now well placed and with the second half of the year traditionally stronger for Western & Oriental we are optimistic with regard to the results for both the half and the full year to 30 September 2009, absent any further significant deterioration in the economic environment.