european specialist holiday group european specialist holiday group investor day caythorpe park 28...
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European specialist holiday groupEuropean specialist holiday group
Investor DayCaythorpe Park
28th September 2007
European specialist holiday groupEuropean specialist holiday group2
Corporate Overview – Carl Michel
Education (PGL) – Martin Davies
Q&A
Hotel Breaks – Nick Cust / Mark Wray
Q&A
Adventure – Simon Tobin
Q&A
Camping – Steve Whitfield
Q&A
INVESTOR DAY PRESENTATION
European specialist holiday groupEuropean specialist holiday group
Corporate Overview
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Build on core competences: leverage synergies Develop a multi-path approach Pursue sustainable faster growth
Secure strong positions in higher margin businesses
Diversify sales mix
STRATEGIC GOALS
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Turnover (£m)
Operating profit before exceptional items
(£m)
* Based on: Holidaybreak FY results to 30 September 2006; PGL 12 months to 22 February 2007.
34%
22%
30%
14%
Hotel Breaks Adventure Travel Camping Education
40%
25%
35%
Hotel Breaks Adventure Travel Camping
Before
After
PRO FORMA DIVISIONAL SPLIT*
48%
16%
36%
Hotel Breaks Adventure Travel Camping
39%
14%
31%
16%
Hotel Breaks Adventure Travel Camping Education
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Consolidation amongst major tour operators Thomas Cook and TUI Travel now listed on FTSE Will lead to only modest pruning of retail estates Ability to control margins still to be tested
Online growth slowing down Consumers more ‘savvy’; prefer building trust-based relationships Affiliates being squeezed
HMG really pushing the Outdoor Learning agenda Fragmentation of tastes throws up new niche opportunities Green lobby and political responses will become much more
prevalent for wider tourism market
MARKET TRENDS
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Education (PGL)
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PGL operates in three areas Outdoor education and adventure for schools School Tours School Ski Trips
Market High Margins A market-leading position Very high barriers to entry Strong demand conditions Under supply Visible income
OVERVIEW
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Outdoor Education and Adventure
Drivers Competition
PGL is the clear market leader in this sector
PGL operates predominantly at the Key Stage Two level for 8 – 12 year olds
Estimated market growth of c. 7% over from 2005 - 2010
In excess of 800 registered operators in the outdoor sector. Over 60% are not for profit (i.e. LEAs)
Market historically dominated by LEAs
Funding pressure and teacher expectations means LEA provision is decreasing
Administration and fear of litigation means teachers are less willing to organise
Experienced commercial providers sought
Brand recognition and values important
Demand at peak outstrips supply
Government support for outdoor learning
Other operators:
- Acorn
- Travelclass
- Kingswood
- NST
- Manor Adv. The market is also
served by 99 LEA centres
In addition there are a further 50 registered centres usually run and managed by the owner
OUR MARKETS
Size
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School Tours
Drivers Competition
Market trend of more foreign travel
Core age range – 11 – 16 years
Majority of operators in this sector are growing at c. 3% per annum
Static real growth
Risk management and government approval issues impacting the outdoor education market also apply
Admin / risk management costs will drive business towards the larger, more professional operators
Brand awareness and trust is key
Barriers to entry will become even higher
PGL sees an opportunity to professionalise the market, taking share from smaller operators and DIY
Other operators include NST and STS
Further consolidation would offer larger players scale and more comprehensive product ranges
OUR MARKETS
Size
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Ski
Drivers Competition
The market has been in decline since the late 1980s
The majority of LEAs do not see the educational benefits of such trips, hence the industry is focused on school holiday periods
Opportunity to reposition as an educational product
Due to the declining nature of the market, PGL’s strategy is to increase market share and build margin
STG Ski bound 4 other mid size
operators There are also
numerous other smaller players and DIY comprising the remainder of market supply
OUR MARKETS
Size
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Investment in facilities and infrastructure to extend market position and potentially improve margins
Identify additional sites Develop range of services and customer relationships
Acquisitions
Organic growth
Refurbishment
Optimalstrategy
GROWTH STRATEGY
Increase size of business to match PGL reputation
Developing second tier management and potentially acquire additional expertise
Understanding opportunities in the marketplace
Known acquisition targets
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Increase capacity Acquisition Increase capacity of existing sites Partner sites
Maximise gross margin Concentrate on 500+ centres Migrate customers to new, larger centres Premium price at peak Improve off peak and shoulder fill Improve facilities to raise tariffs Maximise on site income
Grow school tours and ski market share Acquisition Capture share from DIY market NPD Grow centre based accommodation
GROWTH STRATEGY
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Develop holidays business New product development Build infrastructure to cater for growing family market Group partnerships Consumer marketing investment
Maintain, influence compliance and credibility Lead BAHA’s influence Ensure PGL is in vanguard of all LEA and DFES groups and working parties
Recycle property asset base Sell underperforming assets Sell non trading property
GROWTH STRATEGY
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Consolidation PGL currently focuses on UK residential centres for key stage 2 (8-12) “Winners” will provide out of classroom products for wide age range
PGL Brand Opportunity to increase the size of the business to match reputation
Synergies Potential benefits in overhead reduction, market pricing, market segmentation,
gross margin
People Chance to develop second tier management and acquire additional expertise
Strategic Partnerships To meet all schools residential out of classroom learning needs Potential for investment in partnership for long term stability
Broadening of brand proposition A significant school tours business will deliver a core of 12-18yr olds
Economic Model A significant tours operation will generate cash during winter
RATIONALE FOR ACQUISITIONS
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Profitable and cash generative business Established market leader Generic brand Growth markets Superb reputation Loyal customer base with significant repeat revenues Visible income Consolidation platform Quality asset backing including strong freehold property Management team with a record of success Opportunity to grow
SUMMARY
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Q&A
European specialist holiday groupEuropean specialist holiday group
Hotel Breaks
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Wide distribution platform:Market Overview * Superbreak- 40% online - 35% online- 60% agent / telephone - 65% agent /
telephone
* Source – The Listening Company (methods of booking foreign travel)
Maintaining gross margins / good relationships Distancing ourselves from ‘bed banks’ Adding ‘unique’ product to package with hotels Changing product mix
Packaged content increased from 27% (05/06) to 40%+ (06/07) Purchase of West End Theatre Bookings Rail initiatives New Web Content team (includes non hotel contractors)
OVERVIEW
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Overseas hotels Expansion of hotel product: 2,400 → 4,000 Challenges
Traditional cities (e.g. Prague) Margin erosion and commitments on Beach
Appeal to UK travel agents Expansion of medium/long haul destinations Introduction of transfers – Autumn 2007 Continued focus on packages (ex air) A balance for UK events + circumstances
Bookit Expansion of hotel product: Hotelletje Integration of websites through Weekendjeweg.nl Expansion beyond Benelux (Citytripper) Bungalows
Expansion in South of France Other hard walled accommodation
Vouchers Own photographic imagery
INTERNATIONAL
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IT investment More stable technical platform – migration of mainframe in late 2008 New website design; holiday reviews; theatre video streaming; voucher
redemption Content Management System Own photographic imagery and video Differentiation of web offering complementing product
Superbreak becoming more defensible Bookit – product creation (15% of Dutch households) West End Theatre
More packaging Better margin
Ongoing review of acquisition opportunities Embassy / Highlife West End Theatre
GROWTH PROSPECTS
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Q&A
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Adventure
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OVERVIEW
Travel experiences for individuals and groups
Expanding portfolio Value added: hard to recreate individually Consumers: on trend, altruistic, experience seeking,
‘middle youth’ Industry structure: fragmented, highly competitive, high
knowledge requirement, high margin/costs Flexible product dimension: ‘open’ and ‘closed’ groups.
small groups, individuals and families Business characteristics: low fixed costs, minimum
commitments, constant innovation
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BRANDS AND PRODUCTS
EXPLORE! Worldwide, Family Adventures, Cycling, Beyond, School Adventures, Short Breaks,
Special Interest InStyle, Rail journey, Antarctic and Expedition cruising
DJOSER nl Worldwide, Family Adventures (Junior), Walking and Cycling, Special Interest
THE TRAVELPLUS GROUP Carpe Diem: Language Travel Travelworks: Work & Travel, Volunteer, Internships and high school placements
REGAL Diving Red Sea and Worldwide, Shore and Liveaboards
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BUSINESS MIX AND MARKET
Adventure small groups Family Adventures +20%; Cycling +40%; Special Interest doubles; Antarctic & rail
journeys grow
Destination mix alters annually Middle East & Egypt affected; Europe softens; South America, North & Central Asia,
South & West Africa grows
Learning, volunteer work & gap travel Sector seeing strong growth in UK and European markets
Market trends Overseas holidays to grow 16% from 2006 – 2012 Long haul to reach 10.8m holidays by 2011 (+29%) 41% of adult population will be single in 2011 Fastest growth in Independent Holidays Technology creates a changing consumer mindset ‘Middle Youth’ not ‘Middle Age’ Green Issues – carbon offsetting, conservation, eco-awareness APD – despite increase, air travel has never been cheaper Luxury market grows – quality and authenticity, active days and comfortable nights
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GROWTH PROSPECTS Organic initiatives
Djoser brand across N. Europe New and continuing product development in Special Interest sectors Travelworks (work & volunteer travel) to launch in Austria Schools Adventures expands: potential to work with PGL New distribution opportunities: Spirit of Adventure, Habitat for Humanity Explore to launch ‘Independent’ holiday proposition in 2008
Acquisitions Opportunities exist for consolidation in markets and in specialist sectors Targets in Europe to enhance existing distribution / add new product or expertise
Macro trends support growth Fragmented sector – consolidation opportunities Geopolitical events / natural disasters can have short term effect Leverage sector market leadership in UK and Northern Europe Real opportunities for cross-marketing of products across the group. Flexible model allows for innovation and speed of response Investment in technology and in house travel expertise
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Q&A
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Camping
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Eurocamp and Keycamp Market leading brands Quality product with flexibility and choice High satisfaction levels and loyalty Strong pan-European sales and marketing Large segmented databases Disciplined capacity planning and yield management
Eurocamp Independent Pitch and ferry reservation service Acquisition of Select Sites (Oct 1st)
Easycamp Value based holidays in site owned Mobile Homes Low risk model well placed for growth
Own a Holiday Home Sales of Mobile Homes for residential use in France Leverage customer databases and brand strength
OVERVIEW
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Regional trends Annual review of demand profile Flexibility to respond
Tents in decline (10%-20% p.a.) Operational flexibility within the season
Mobile Home capacity now broadly in line with market demand Over 8000 Mobile Homes Choice of styles and sizes Look and feel of different models Increase in larger, more luxurious Mobile Homes Decking and air conditioning
Quality Important for repeats and recommendations Justifies price premiums
Disposal considerations Stable capacity
1000 replacements = ~ £10m net Capital Expenditure
CHANGING PRODUCT MIX
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New destinations New accommodation types Adding value
Children’s Courier services Soccer Service Activity services
Exploiting PGL synergies Activity product for camping in 2008 Purchasing Recruitment
Managing stable core business Cash generative with strong profits, high margins and excellent return on
capital Maintaining market leading position
Invest in new accommodation Exploit technology to access new customers and drive down selling cost Innovate and develop new product options
PROSPECTS
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Q&A